MAVESA'S NELLY BRAND: IMPROVING DISTRIBUTION TO GAIN MARKET CONTROL
Exhibit 1
FORECAST PROFIT IMPACT OF PROPOSED PRICE CUT
1999/2000 | 2000/2001 | |
Current | Proposed | |
Weighted Average Ex-factory price | 680.68 | 486.59 |
COGS | 409.25 | 322.24 |
Gross profit (Bs/Kg) | 271.43 | 164.35 |
Net Sales | 308,652,005 | 364,395,468 |
Gross profit | 123,079,000 | 123,079,000 |
Units required to match gross profit | 453,447 | 748,883 |
Equivalent number of Tons | 227 | 374 |
According to the new proposal, Mavesa would need to sell more than 60% number of tons in order to achieve the same gross profit.
Exhibit 2
PRICE STRUCTURE FOR WHOLESASLERS (500-gram presentation)
New Proposal | ||
Wholesaler | Wholesaler | |
Suggested Price including tax | 1189.00 | 1189.00 |
Minus 15.5% tax | 159.56 | 159.56 |
Price not including tax | 1029.44 | 1029.44 |
Marketing margin | 11% | 11% |
List price | 916.20 | 916.20 |
Channel Discount | 861.23 | 861.23 |
Promotion discount | 645.92 | 602.86 |
Financing Discount | 633.00 | 590.80 |
ex-factory price | 633.00 | 590.80 |
Plus 15.5% tax | 98.12 | 91.57 |
Ex-factory price with tax | 731.12 | 682.38 |
Profits (Bs/Presentation) | 457.88 | 506.62 |
% Profit/suggested price with tax | 38.51% | 42.61% |
Assumption | ||
Channel discount 6% | ||
Promotion discount is 25% | Promotion discount is 30% | |
Financing discount 2% | All remains the same |
The first column shows the actual arrangement and the second one, the new proposal to wholesalers.
Net income
Sun-Rype Net Income
TopRank Online Marketing Distribution ChannelsThe following chart shows how this change will impact the overall discount given to the distribution channels:
Channel | Discount | Weight | Weighted average |
Wholesaler | 38.51% | 44% | 17% |
Distributor | 38.60% | 16% | 6% |
Supermarket | 26.97% | 13% | 4% |
S/M Stores | 36.55% | 27% | 10% |
100% | 36.49% | ||
Channel | Discount | Weight | Weighted average |
Wholesaler | 42.61% | 44% | 19% |
Distributor | 38.60% | 16% | 6% |
Supermarket | 26.97% | 13% | 4% |
S/M Stores | 36.55% | 27% | 10% |
100% | 38.30% |
The change is approximately 2% more in overall discount.
Exhibit 3
MAVESA'S CONSOLIDATED STATEMENT OF INCOME (US$000s)
Forecast | |||
1999 | 2000 | ||
Net sales | 417,800 | 438690 | ( 5% more sales) |
Cost of sales | 270,400 | 270,400 | constant |
Discounts* | 8773.8 | (2% more promotion discounts) | |
Gross profit | 147,400 | 159,516 | |
Selling, General & Admin. Expenses | 112,600 | 112,600 | constant |
Operating Income | 34,800 | 46,916 | estimate |
Interest expenses | 16,700 | 16,700 | constant |
Exchange gain(loss) | 5,200 | 5,200 | constant |
Income before other income and taxes | 23,300 | 35,416 | |
Taxes | 1,700 | 2,584 | estimate (7.30%) |
Net Income | 21,600 | 32,832 |
*It is assumed that in 1999 the discount is already included in the net sales.
References
Dawar N; Ebanks N "Mavesa's Nelly Brand: Pricing to gain market control" Ivey Number: 9B00A008 Publication Date: 19/06/2000 Revision Date: 30/01/2002 Geographic Setting: Venezuela Industry Setting: Food and Kindred Products
Keegan and Green "Global Marketing" Fifth Edition. Pearson prentice Hall
Mavesa's Nelly Brand Lyann Chang �PAGE � �PAGE �2� Mavesa's Nelly Brand