RELIANCE BAKING SODA

A Case Study | Optimizing Promotional Spending

CASE INTRODUCTION
 Stewart 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 Division’s 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.
OBJECTIVES
 Our 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.
LIMITATIONS
 Trade 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.

ROOT CAUSE DIAGRAM

Low
Overstocked Boring and
Advertising
Inventory low traffic
recall
Trade
promotions

Market share Old Private

reduced fashioned label
STRENGTHS

 Trusted Brand RBS

 Clear Market Leader - 70% market share with 85%
US household penetration
 Enjoys 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 detergents
 Excellent Brand Awareness and Loyalty. 95%
mentioned RBS when asked about Baking Soda.
OPPORTUNITIES
 Baking 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.

OPPORTUNITIES
 Out-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 doesn’t break off from the

Brand Lineage of the household division
RECOMMENDATIONS –
CONSUMER PROMOTION

 10% Price rise across all product ranges.

 Promotion through Top 4 Women Magazines

 Reintroduction of the highly demanded Twin

Packs.

 Loyalty Bonus - Redeemable 30¢ Coupons

INNOVATIONS

 Website 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)
THE SUPPLY CHAIN

Supplier

Manufacturer

Trader / Mass Merchandise /

Workhouse

Consumer
RECOMMENDATIONS-
TRADE PROMOTIONS

 Re-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 Period Promotion days Promotion Activity 8 Oz 1 lbs 5 lbs
January 41 Refund Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
April 21 Cross-ruff Coupon Scheme 10 + 2
Scheme 10 + 2
June 38 Twin Pack/Refund & 5% ad
2006
August/ Sweepstakes and Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
September 43 Refund & 5% ad & 5% ad & 5% ad
November/ 12 % Off 15 % Off
December 50 Invoice Invoice
January/ Self liquidating 10 % Off
February 40 premium Invoice
10 % OI + 5% 10 % OI + 5%
2007E April 20 Coupon ad ad
May 21 Scheme 10 +2
10 % OI + 5%
June 22 ad
January/
February 41 Refund Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
April 21 Coupon Scheme 10 + 2
Scheme 10 + 2
2008E May/ June 38 Twin Pack/Refund & 5% ad
August/ Target 250 get Target 250 get
September 50 Target Scheme 50 extra 50 extra
November/ Target 250 get Target 250 get
December 50 Target Scheme 50 extra 50 extra
THREATS

 Fiddling 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
 2005 2006 2007E 2008IE 2008E

Manufacturer's price per case

8 oz $6.18 $6.37 7.2 7.92 7.82

1 lb $10.33 $10.64 12.02 13.222 13.02

5 lb $46.63 $48.03 54.28 59.708 58.708

Factory shipments(in 000's of cases) 0 0

8 oz 640 793 714 714 800 27.70%

1 lb 1099 1362 1226 1226 1350 46.50%

5 lb 581 720 648 648 750 25.80%

Variable manufacturing cost per case 0 0

8 oz $3.02 $3.05 3.38 3.718 3.41

1 lb $4.98 $5.03 5.58 6.138 5.63

5 lb $22.12 $22.34 24.8 27.28 26

Gross sales $42,400 $54125 55051 60556.1 67864

Variable manufacturing cost $20,258 $25354 25325 27857.5 29828.5

Gross margin $22,142 $28771 29726 32698.6 38035.5

52% 53% 54% 54.00% 56%

Advertising

Tv $2,862 $4453 3815 4196.5 4000

Print $687 $950 694 763.4 1500

Internet $76 $238 248 272.8 1000

Total Advertising $3625 $5641 4757 5232.7 6500

PR/media production cost $191 $297 198 217.8 198

Consumer promotion $424 $1080 551 606.1 1400

Trade promotion $4240 $5938 5505 6055.5 8977.5

Total marketting expenses $8480 $12956 11011 12112.1 17075.5

Profit before SG&A, Overhead and Taxes $13,662 $15,815 18715 20586.5 20960
BUDGET FORECAST

70000

60000 Profit before

SG&A, Overhead &
50000 taxes
Promotion Costs
40000

30000
Total Advertising
20000

10000 Variable
Manufacturing Costs
0
Year Year Year Year
2005 2006 2007E 2008E
 BOTTOM LINE GROWTH

$25,000
$20,000
$15,000
$10,000 Series1
$5,000
$0
2005
2006
2007
2008
THANK YOU
RBS – A Houseful of Uses