04-2317-96-1 Case Study: UNITED FOAM INDUSTRIES (PVT) LTD Facilitator: Dr. Mohammad Majid Mahmood Bagram Issues: 1) Compare and contrast marketing strategies of different players in the foam industry. 2) What short-term and long-term problems are faced by United Foam Industries (Pvt) Ltd? 3) As United’s Managing Director, what would you do?(04-2317-96-1 UNITED FOAM INDUSTRIES (PVT) LTD On July 5" 1996, Mian Javaid Amir, Managing Director of United Foam Industries (Pvt) Ltd, (United), Lahore received a depressing news. Following up on its recent threat, Diamond, the second largest competitor in the foam industry, had increased its discount to Diamond dealers by an additional ten percent. Javaid could easily imagine the reaction of his dealers to this news. Only three days back, he had a stormy meeting with his dealers who were up in arms because of lack of sales which in their opinion was due to the high United foam prices. Javaid wondered how would United survive the beginning of this apparent price war between Diamond and the market leader, Master. COMPANY BACKGROUND United was one of the four subsidiaries of Shaikh Group with an annual turnover of Rs 140 million in 1995 (see Exhibit I for financial performance). The other subsidiaries were involved in various textile related businesses. United was a family-owned business and was the second player to enter the foam industry in the formal sector in Pakistan. Mian Javaid Amir had built the business from scratch. Prior to United, Javaid had worked for fourteen years in National Tyre and Rubber Co (Pvt) Ltd, (National) in various capacities. In 1970 he was sent to a three-months training programme in Europe. It was there that he became aware of the huge potential that foam manufacturing might offer in Pakistan. He wondered whether he should set up his own foam plant. Back in Pakistan, he started discussing his ideas’ with various friends who could provide him funding. One of his friends, Mr Khalid Rasheed Sheikh, got seriously interested in this project. Mr Sheikh was involved in the textile business and was looking for diversification opportunities. By 1975, Javaid and Mr Sheikh had finalised their plans. In 1976, Javaid resigned from his job and he together with Mr Sheikh established United. FOAM TECHNOLOGY, QUALITY, AND COST OF PRODUCTI In its very basic foam, foam production was simply a chemical reaction between two chemicals, Toluene Disocyanate (TDI) reacted with Polyoxypropylene Glycol (PPG) at 14°C aided by catalysts like amines and silicones. While the ingredients were being mixed, air in very small amounts was injected at fixed intervals into the mixing chamber. As the liquid flowed, carbon dioxide contained in the chemicals diffused into the air. This process transformed the liquid into a soft creamy foam. The foamy mixture expanded as ‘This case was written by Mian Hassan Javaid under the supervision of Associate Professor Ehsan ul Haque to serve as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or reproduced in any form without the prior written consent of the Lahore University of Management Sciences. © 1996 Lahore University of Management Sciences04-2317-96-1 polymerisation took place. The foam gradually gelled and became strong enough to remain standing in a rectangular form. It was then dried and cut in various shapes and sizes. ‘There had been a few changes in the technology employed for foam production. In the conventional plants, two jets of chemicals mixed in the air and the mixture deposited on a paper in a mould. The chemicals were forced through nozzles using different flow rates. Over time new plants were introduced with different capacities of these flow rates ranging from 60 Ibs/min to 350 Ibs/min. This differential in flow rates resulted in foam of varying heights. For example, a 120 Ibs/min capacity plant could produce a raw foam of 36 inches height while a 350 Ibs/min unit could produce a raw foam of 42 inches height. Extra height resulted in significantly lower overall production costs as the wastage (consisting of cut corners and other trainings) in a 42 inch high foam was almost 20% less than that in a 36 inch high foam. In 1984, Maxfoam technology was introduced in Pakistan. In Maxfoam plants, the chemical reaction took place inside a mixing chamber. This resulted in a better quality of foam in terms of its molecular structure. In addition, Maxfoam technology resulted in lower production costs as it was available with the flow rate of 375 Ibs/min. Foam quality was primarily determined in terms of its density. This density could be controlled by varying the proportions of PPG and TDI used in the process. A higher proportion of PPG, as compared to that of TDI, resulted in a higher density foam which was considered as a good quality foam. In Pakistan, foam traditionally came in five grades (density levels). Highest quality foam (grade A) had a density of 35 kgs/cu.mt while the lowest quality foam typically (grade E) had a density of 20 kgs/cu.mt In addition to the flow rate capacities of plants, the cost of foam production was also influenced by the procurement policies of companies. The price of PPG and TDI fluctuated regularly (at times, drastically) in the international market. Large producers, with the financial muscle to procure and store these raw materials in large quantities, could benefit from such price fluctuations. ‘The cost break down of a typical foam product was as follows: Raw Materials 45% Import Duties on RIM. 30. Sales Tax 10 Other Manufacturing Cost 5 Sales, General & Admin. 10 The cost of foam manufacturing was impacted dramatically in the late eighties by government policies. In 1988, the Government of Pakistan, in order to industrialise remote areas, announced huge incentives to producers who would locate their factories in Gadoon, NWFP. The incentives included exemptions from income tax and sales tax on local manufactured goods, and exemptions from custom duty, sales tax, and surcharge on imported plant and machinery. Other advantages included a 50% concessional rate for electricity, project financing at a heavily subsidised rate of 3%, and a 25% rebate on import duties of raw material. These incentives led to installation of many foam plants in04-2317-96-1 Gadoon giving these manufacturers significant cost advantages. However, by early 1995 these incentives were withdrawn by the GOP. COMPETITION Foam industry in Pakistan was dominated by the informal sector prior to the 1960s. In March 1964, National entered the industry with an automated plant of 60 Ibs/min capacity. Soon afterwards, in September 1964, Master Enterprises (Pvt) Ltd, (Master) also joined the industry with a similar plant, For the next ten years these two companies were the only producers in the organised, formal sector in Pakistan. There were many small producers, operating in the informal sector, in the market. However, their aggregate sales volumes were considered not very significant by the industry. In 1975, National discontinued foam production due to financial problems leaving Master with a virtual monopoly in this area. Low entry costs, a rapidly developing market, and a simple technology led to few other companies enter the foam industry. By 1995, there were several plants operating in the country (see Exhibit 2). According to industry estimates, industry sales had touched Rs 1.5 billion in revenues and 13,000 tonnes in quantity in 1995. Almost 20% of sales were in Sindh, while the remaining 80% were in other regions of the country, primarily in Punjab and NWEP. In 1995, foam industry was dominated by five manufacturers. Master was the market Ieader in sales (see Exhibit 3) while Al-khair, a new entrant, was the smallest manufacturer. Each of these companies seemed to be following a different marketing strategy. A brief discussion of each follows: Master Foam Master was one of the Subsidiaries of the Master Group of Companies. The other businesses of the group included textiles and auto-engineering. Although Master had diversified into other businesses, foam remained its codre business. In the early sixties, Master was involved in the manufacturing of Latex rubber. The company entered into a ten-year licensing agreement with Bayer who were the leading manufacturers of foam in Germany. For the next ten years, Master marketed Bayer's product called Moltipren, in the Pakistani market. At the end of the agreement, Master started selling the product under its ‘own brand name, Molty. Master was reputed in the industry for innovative and aggressive marketing. It had been upgrading its technology on a regular basis. It introduced many new products in the market such as Molty-Orthopedic mattress and Contour Pillow. Master had over the years built a very strong reputation of quality. Through its aggressive advertising, and partly because of its pioneering advantage, Molty Foam had become almost a generic name in Pakistan. ‘Another reason for Master's success was considered to be its plant location policies. Foam transportation costs were high as the value relative to the volume-occupied was low. Consequently, each plant had a limited area where its products could profitably compete. Master, by locating its plants in the three provinces of Pakistan, had achieved the best coverage of the whole country.04-2317-96-1 The three plants of Master, however, were operated by sister companies by the names of Master Enterprises (Pvt) Ltd, Durafoam (Pvt) Ltd, and Khyber Plastic and Polymers Industries Ltd. Each company had a whole range of brands given below: Foam Quality Master Durafoam Royal (Karachi) (Lahore) (Gadoon) Highest ‘Molty Flex Tnterfoam : Molty Foam Luxury King Premium, = 5 ‘Commander Top Queen Lowest Jet Comfort Prince Unit sales of Master, Dura, and Royal were estimated to be 60%, 30%, and 10% respectively, while the rupee sales were 70%, 22%, and 8% respectively. ‘As the price sensitive segment of Pakistani market grew Master did not want to dilute Molty Foam’s image by reducing its price. Consequently, Master introduced Durafoam and Royal to compete in the low price segment of the market. According to industry sources, Durafoam was primarily targeted towards the furniture shop market, Master followed a policy of intensive advertising during the peak foam selling season, i.e., between September to April. During this time both TV and print ads were used (see Exhibit 4). The company often sponsored a programme on TV aired during the prime time. ‘The frequency of ads was one advertisement daily on national television while typical duration of each ad was 15 to 30 seconds. During the off season, the average frequency of ads dropped to one ad aired every two months. In 1995, Molty Foam had spent roughly Rs 20 million on TV ads. There was very little advertising done for Durafoam and Royal Foam brands. Sometimes Master would also offer promotional items like wall clocks and calendars, etc., to the dealers. However, according to the dealers, these items did not stimulate sales to the household customer. Exclusive dealership was the most commonly used distribution system in the foam industry. Master had 250 dealers spread all over the country. Its dealers were financially strong and they enjoyed a high turnover because of Masters strong following. Master extended a discount of 18% to its dealers and a bonus of 2% if they met their sales targets. Dealers were allowed to pass on some of the discount to customers. However, Master had placed an upper limit on discounts that dealers could offer to customers , i.e., 10% maximum to household customers and 13% to furniture shops. These margins applied to Master only. For Durafoam dealer discounts were 30% Dura and Royal margins were also more flexible and could be altered according to the type of the customer. Master's dealers preferred to sell to household customers as, according to them, this segment was less price sensitive. The furniture shops, apart from being price sensitive, also demanded credit facilities which was not possible for Master dealers since they purchased on advance cash payment from the manufacturer. Master dealers were serviced by a sales force of 30 salesmen.04-2317-96-1 Diamond Foam Diamond Foam was one of the subsidiaries of the Diamond Group of Industries. The company started manufacturing foam in the informal sector in 1978 and entered the formal sector by installing a Maxfoam technology plant in 1984. Initially, Diamond focused its marketing in the south but later on it expanded into north as, well. According to industry sources, one of the major reasons of Diamond's initial success was very aggressive advertising, unheard of in the foam industry. In the early years there ‘was a fierce rivalry between Diamond and Master. For example, in 1986, Diamond tried to combat Masters advantage by issuing limited guarantees for its foam products for the first time. Soon all the manufacturers followed this practice. Master then responded by putting zips on the covers of its mattress. Master made TV ads emphasising the good quality Master Foam beneath the cover by unzipping the cover and showing the "real" mattress. This practice was also followed by all the manufacturers. In retaliation Diamond started to weigh mattresses of different manufacturers to show that only Diamond had the proper weight and the real quality. This rivalry continued over the years, albeit, with less intensity. In the beginning of 1995, Diamond went public through their Gadoon Amazai plant. With this, Diamond also had three foam manufacturing plants in Karachi, Lahore, and Gadoon. Just like Master, Diamond also established sister concerns to operate the new plants. The company’s product line consisted of fifteen brands of foam in various quality grades. Its, premium brand was Supreme. However, the company concentrated more on slightly lower quality brands than on the top of the line high quality brands. After the initial round the year intensive advertising, which helped Diamond establish a name for itself in the market, Diamond advertised on television only during the peak season. Even these ads were only for Diamond Supreme. The lower quality brands relied more on push rather than pull. Diamond's advertising expenditure had remained constant over the years. In 1995, it was estimated to be about Rs 10 million. Diamond had 150 dealers all over Pakistan. These dealers purchased foam on advance cash payment from the manufacturer. Diamond attempted to give sales targets to its dealers. However, it was rumoured that this idea had failed as it only increased dealers inventory. Diamond dealers got a discount of 20% on retail price -- 2% more than what Master's dealer got. Diamond kept the largest sales force (55 people) in the foam industry to service its customers. Mehran Foam ‘The Mehran Group was a family-owned business based in Lahore. They had been dealers of Master for the whole of Punjab for fifteen years before they decided to start the production and marketing of foam in 1984, Mehran had three foam manufacturing plants in Lahore, Gadoon and Kamoke (near Lahore). The company had five brands in its product portfolio. Its unit sales were known to have been growing at a rate greater than the industry's growth rate of 15%. This increase in04-2317-96-1 sales came mainly from the increased consumption of its lower quality brands in the market. Mehran did not advertise its brands and followed a low cost, low quality policy. It marketed its products primarily by "pushing" them through the channel. The CEO felt that the foam industry as a whole was moving towards low quality and low price products. Thus, the company was positioned to take advantage of the changes in the industry. Mehran was concentrating primarily on Punjab, as they felt Punjab offered the greatest potential in terms of sales growth. Another reason for this was the high transportation costs involved in transporting foam. It was not feasible for the company to distribute its products to other areas in the country. Mehran had 100 dealers, mostly in Punjab. Some of the dealers were also family members of the owners. Its dealers sold foam primarily to the furniture shops on credit. Mehran provided its dealers promotional material to be given to furniture shops. Before the advent of Al-Khair, Mehran offered the highest margins in the foam industry, ic., 27% to its dealers. It also kept a sales force of 12 to service its dealers. Al-khair Foam Al-Kkhair was a newly established public limited company which joined the industry in 1994 through its Maxfoam plant at Gadoon. Using its contacts, Al-khair had obtained a duty free import quota on its raw material equal to 25% of its capacity. As the capacity utilisation in foam industry was around 20% this represented a tremendous advantage to the company. It was rumoured that the company saved many millions of rupees in this fashion. Al-khair put the money thus saved into advertising and dealer credit. Over the last couple of years, Al-khair sales grew tremendously. According to industry sources, there were three reasons for its growth. First, it produced a reasonably good quality of foam which was priced relatively low. Second, it executed a nice and extensive advertising campaign for its top of the line Five Star brand. Third, Al-khair extended lots of credit to the dealers to stock its product. They also provided 30% margin to their dealers. Foam industry reacted sharply to Al-Khair's inroads. When Al-khair offered a life-time guarantee with its foam (an innovation in the industry) Diamond and Master retaliated with bringing out a cheap foam and branding it as Life-Time Guarantee. Al-khair retaliated by increasing expenditures on ads as well as dealer point of sale materials (see Exhibit 5). FOAM MANUFACTURERS ASSOCIATION In 1985, the three players operating in the formal sector of the industry were Master, United, and Diamond. Hussain Chemicals was a major supplier of imported chemicals used in the production of foam. Negotiating raw material prices on a monthly basis with three different manufacturers was becoming problematic for Hussain Chemicals. The company, therefore, requested foam manufacturers to form a common platform to facilitate the decision making process regarding the prices of imported chemicals. In response to this request, Master, United, and Diamond formed the Foam Manufacturer's Association (FMA) in 1985. Under FMA umbrella chemical prices were fixed each month and everybody was expected to pay the same price.04-2317-96-1 The FMA provided foam manufacturers with a forum where they started discussing other problems facing the industry as well. They could now jointly negotiate with the government, the suppliers, and the dealers regarding issues of common interest. Over a period of time FMA was also entrusted to set the retail prices for foam. This decision was taken to overcome the unhealthy price-cutting competition that industry occasionally engaged in. These prices were subject to review after mutually agreed upon time intervals. FMA made it mandatory for all its members to abide by FMA prices. The retail prices set by FMA in 1995 are listed in Exhibit 6. Foam manufacturers also used FMA forum to agree upon and maintain a differential dealer margin structure for different manufacturers. These margins were set so as to maintain the market shares of different producers. However, these agreements were not always followed by members. Over the past few years, as new manufacturers entered the industry, the membership of FMA increased. However, the three founding members held a controlling position by virtue of being the founders of the association and commanding the highest market shares. Inclusion of new entrants into the FMA was at the discretion of the founders. FOAM CUSTOMERS Over the past few decades, the usage of foam in Pakistan households and offices had increased steadily. Main reasons behind this increase were high population growth rate, rising levels of disposable incomes, and increased urbanisation. The image of foam also transformed gradually from that of a luxury item used only by high income households to that of a necessity product used by all. This shift also brought about with it demand for reduced prices which the lower income households could afford. The customers of foam included household customers and institutional buyers like furniture shops, contractors, and hospitals. According to a survey conducted in 1995, the market was evenly divided between household and institutional buyers. However, the penetration of different companies and brands in these two segments varied widely. Exhibit 7 shows the segment-wise sales breakup for different manufacturers. A survey of 200 housewives in Lahore in early 1995 showed that 25% of housewives could not recall the brand of foam that they had purchased last, whereas 20% of them were undecided about the brand of foam they would purchase in future (see Exhibit 8). Molty Foam carried the highest awareness level and brand loyalty. Household consumers looked fot comfort and durability as the two most important product attributes defining quality for them. Foam was purchased fairly infrequently, most often with a new piece of furniture or for dowry purposes. It was generally purchased through the retail outlets of different dealers. Dealers seemed to play an important role as it was difficult for consumers to judge quality. Furniture shops comprised nearly 90% of the institutional buyers. These shops purchased foam from the dealers, High-end furniture shops, catering to the more affluent customers, usually were quality conscious and purchased Master or other high quality brands. Other shops were not so quality conscious. In any case, most shops were fairly price sensitive and obtained credit facilities from the dealers. The average credit period was 2-3 weeks. ‘The demand of foam for furniture shops was a derived demand and depended upon the demand of furniture. The demand for furniture was highly seasonal and was linked to the04-2317-96-1 marriage season. This resulted in two thirds of the sales occurring in the months from October to March. UNITED FOAM AND THE CURRENT PROBLEMS United had only one production facility located in Lahore. In the early years, United had the advantage of being the only manufacturers in the north. It was thus able to create a niche in this highly lucrative market and establish a firm footing in Punjab and Frontier. Over the years, however, this monopoly was broken as other manufacturers established plants in either Lahore or Gadoon. United did not upgrade its technology in the mid-eighties due to financial constraints. This led to some erosion of its competitive advantage. However, the company met with a severe blow in the shape of Gadoon incentives. Being a tradition, family-run company United lacked the managerial and financial resources to set up a production unit at Gadoon. They were thus unable to take advantage of the incentives offered by the government. This situation resulted in a major handicap for United while its competitors, who capitalised heavily on the opportunity, were able to channelise their cost savings into rapid growth and expansion, United believed in manufacturing superior quality product. It's top of the line mattress was Unifoam. As the foam market moved towards inexpensive brands, United delayed the production of cheaper quality brands. Only in 1993, it entered the low price/low quality segment with Saba Foam and Rose Foam. In 1996, it had nine brands of different qualities in its portfolio. United, traditionally spent little on advertising, relying more on pushing the product through the channel. Lately, however, it had started to advertise on TV and print (see Exhibit 9) to prevent erosion of its market share. In 1995, United had spent roughly 2 million on ads. Approximately 40 dealers, concentrated mainly in Punjab and the Frontier, carried United's products. As United had a regular sales force of only two people these dealers, in addition to being stockiest and retailers, worked as the sales force of united in their respective areas. United Foam gave a 24% discount off the list price to its dealers. These dealers also obtained a credit facility of approximately sixty days from United which was considered as twice the industry average. United also paid for the transportation costs of foam from the factory to the showrooms. By 1996, United was facing a number of serious problems. Its market share was declining rapidly. The competitors had come up with a broad range of products under different brand names and operating through different companies. This had given them more flexibility in pricing the product without hurting the brand image of their premium brands. This also enabled them to keep their dealers’ profitabilities intact while allowing them to offer deeper discounts on different brands. Thus, the competitors could cater to a broad range of customer with different price sensitivities. United had lagged behind in this respect. Another area of concern for United was its dealers. These dealers were getting increasingly frustrated with their sales. Dealers maintained that there was a customer pull for United's products. This made selling the product extremely difficult because customers were 804-2317-96-1 attracted by brand names like Molty, on the one hand, and the reduced prices of Al-khair and Diamond, on the other. Javaid wondered how he could motivate his dealers to push the company's products in the face of all this. Other problems that Javaid faced with dealers were regarding preferential treatment and bad debts. United extended preferential treatment, in terms of discounts, to dealers with high turnovers. The largest dealer of United accounted for a third of company's sales. He was given additional discounts of 3 to 5%. The next thr3ee dealers, who accounted for an additional 20% of the company's sales were unhappy about this situation. They demanded the same treatment. United was also carrying a bad debt of 5% of total dealer credit. This was higher than the industry average of 2%. The company needed badly to recover this amount and to avoid this situation in the future. At the same time, it did not want to restrict its dealer network or interfere with the working of those dealers who were successful in increasing sales. The most urgent problem that Javaid faced was the imminent price war between Diamond and Master. The background to this conflict went back to 1995. In 1995, a major manufacturer of raw chemicals for the foam industry in Hong Kong temporarily shut down because of some problems. This led to chemical prices increase in stages throughout 1995 (see Exhibit 10). During this time frequent meetings of FMA were called to re-fix the retail prices of foam so that all the raw material cost increases were passed on to the customers. This resulted in a massive price increase in all foam products within a year. Pakistani consumers, however, changed their preferences in the face of this price increase. Overall industry sales shifted from high quality, high price brands to lower quality, lower price brands. See Exhibit 11 for the impact of this consumers shift on United's product mix. Furniture shops also shifted their attention to non-branded, lower quality foam instead of buying more expensive branded foam. Some of the manufacturers responded by temporarily increasing discounts to their dealers although this was against FMA decisions. The chemical manufacturing plant in Hong Kong restarted its operation early 1996. As a result, during the first quarter of 1996, chemical prices plummeted. In the next FMA meeting, however, the manufacturers decided not to reduce retail prices as they could not agree on decreasing the prices of foam. This was the peak selling season. In addition, Eid ‘was approaching. Master introduced a free gift scheme during Eid (the month of March). They announced a free contour pillow, worth about Rs 500 with the purchase of a mattress worth Rs 5000. It was rumoured that Master did this in response to the huge discounts offered by Al-khair. During the next meeting of FMA, Diamond vociferously complained about Master's scheme and the under-hand discounts that other manufacturers were giving to their dealers. Diamond said that they had incurred substantial decrease in sales in different regions because of these discounts and gift schemes. Subsequently, Diamond increased its discount by an additional 17%, and threatened to increase it by a further 10% if these under-hand practices were not stopped. All of the manufacturers followed suit and increased their discounts by the same degree. Master, in addition to increasing discount, continued with its gift offer. United had previously maintained a 4% higher discount than Diamond. Its dealers demanded an even higher discounts than those offered by other manufacturers. United's largest dealer, who had been receiving the preferential additional 3% discount previously, 904-2317-96-1 demanded the same preferential treatment even with the increased discounts. He threatened to quit stocking United by the end of the week, saying he had offers from competitors to sell their foam. While Javaid was contemplating how to react to his dealers anger and concerns he received the latest news. Diamond had increased its discounts by an additional 10%. 10Exhibit 1 UNITED FOAM INDUSTRIES (PVT) LTD Income Statements of United (Rs in '000) 04-2317-96-1 ‘Year Ended Year Ended 6 Months December 31, 1994 | December 31, 1995 | June 30, 1996 Gross Sales 120,000 140,000 95,000 Discounts 25,000 34,000 35,000 Net Sales 95,000 106,000 60,000 coGs 65,000 72,500 41,000 Gross Profit 30,000 33,500 19,000 Misc. Other Income 500 700 300 ‘Admin. Expenses 8,000 9,500 5,500 Selling Expenses 17,000 17,000 8,000 Financial Expenses 3,000 2,000 1,000 Net Profit 2,500 5,700 4,800 u04-2317-96-1 Exhibit 2 UNITED FOAM INDUSTRIES (PVT) LTD. Foam Manufacturing Plants in Pakistan Master 1964 Conventional 60 Ibs/min | Karachi 1982 Maxfoam* Lahore 1985 Maxfoam Karachi 1990 Maxfoam Gadoon Diamond 1984 Maxfoam Karachi 1986 Maxfoam Lahore 1989 Maxfoam Gadoon, United 1977 Conventional 120 Ibs/min | Lahore 1991 Maxfoam_ Lahore Mehran’ 1984 Conventional 350 Ibs/min | Lahore 1990 Maxfoam Gadoon 1993 Maxfoam Kamoke (near Lahore) | AL-Khair 1994 Maxfoam Gadoon| Mumtaz 1994 Maxfoam Gadoon, . Vohra 1980 Conventional 220 Ibs/min | Karachi . * all Maxfoam plants of 375 Ibs/min capacity. ; Exhibit 3 UNITED FOAM INDUSTRIES (PVT) LTD Relative Market Share of Large Foam Manufacturers 1994 1995 1996 (%) (%) (%) Master 54 51 51 Diamond 25 2B 20 United a 10 8 Mehran 8 9 10 Al-khair 2 Z 1 Source : Industry Estimates 1204-2317-96-1 Exhibit 4 UNITED FOAM INDUSTRIES (PVT) LTD Copy of a Molty Foam Ad Luxuriously yours...04-2317-96-1 Exhibit 5 (page 1 of 2) UNITED FOAM INDUSTRIES (PVT) LTD Copy of Al-khair's Leaflets for its Dealers ET PUY eon a Fo sal 5762988 - 575371903 540-50. du 61. cic S83 1804-2317-96-1 | Exhibit 5 (page 2 of 2) UNITED FOAM INDUSTRIES (PVT) LTD Copy of Al-khair's Leaflets for its Dealers Sister USE i Spb PE we = SESE Pe ELE Beep WW be Ls Lhe ML Bo Sten ee PEGE oe aah dade dteelap eat i Pa hs pa Pa GaW pls ao CBD ALE eSB 15 ell Ke NaC tll ie at) Od se Sz DeMYSAA- 2014S IMO SA ser Fon |Exhibit 6 UNITED FOAM INDUSTRIES (PVT) LTD. 04-2317-96-1 Gross Prices & Costs of Different Qualities of Foam in December 1995 Foam Quality Manufacturing Cost Retail Price (Rs/eu.ft) (Rs/eu.ft) Highest A. 133 410 B 110 333 iC 100 215) Dd 90 250 Lowest E 60 120 Exhibit 7 UNITED FOAM INDUSTRIES (PVT) LTD Segment-Wise Breakup of Sales of Different Companies Company Household Buyers Master 80. Diamond 75 United 40 Mehran 15 Others 10 Exhibit 8 UNITED FOAM INDUSTRIES (PVT) LTD Selected Findings of the Household Survey Brand Brand Last Unaided Recall Brand Loyalty* Purchased (%) (%) (%) Molty Foam 46 37 68 Diamond 27 21 35 Unifoam 7, 17 37 Mehran o a = Others 2 3 = Don't Recall 25 20 = * 68% of previous Molty Foam customers intended to purchase Molty Foam in the future. Rating of Product Attributes Importance Attributes Rating Comfort 431" Durabilit 4.26 Price 3.65 Brand Name 3.49 * ona scale of 1-5 where 1 was least important and 5 was most important. 1604-2317-96-1 Exhibit 9 UNITED FOAM INDUSTRIES (PVT) LTD Copy of a United Ad bee paler Schein ace Me ied ee eck lca ciesExhibit 10 UNITED FOAM INDUSTRIES (PVT) LTD. Raw Material Price Fluctuations 04-2317-96-1 Period PPG Price TDI (Price Price of Grade A (Rs/kg) (Rs/kg) Foam (Rs/eu.ft) 1° Q°95 3 103) 285 27Q95 75 103 315 37 Q°95 87 128 350 4° Q95 106 152 410 | 1° Q°96 87 128) 410 2° Q°96 87 128 410 Source: Company Records Exhibit 11 UNITED FOAM INDUSTRIES (PVT) LTD Quality-Wise Breakup of United's Production Foam Quality 1991 } 1993 1995 1996 (%) (%) (%) (%) A 19 20 15 18 B 33) 35 36 22 Ci 30 39 44 22 D 6 5 17 E 8 14 Source: Company Records 18