Reliance Baking Soda
A. Past Promotional Events
Evaluate the effectiveness of past RBS consumer and trade promotions. How have the promotional strategies impacted sales volume? For 2006, what was the return on investment for the various consumer and trade promotions? (Highlight these values in yellow.)
B. Changes in Trade Promotions
What are the principal arguments for maintaining significant trade promotion expenditures? What are the principal arguments for reducing the trade promotion budget?
C. Evaluation of Alternatives
Alternatives for reaching the 2008 target profit can be achieved by: 1) increasing price, 2) cutting the marketing budget, 3) increasing price and cutting the marketing budget, or 4) increasing price and increasing the marketing budget. Evaluate each of these alternatives.
How much of a price increase would be required to meet the 2008 target profit if no other changes occurred? (Highlight this value in yellow.)Include this in the section on increasing price. How much of a decrease in marketing budget would be required to meet the 2008 target profit if no other changes occurred? (Highlight this value in yellow.) Include this in the section on cutting the market budget.
D. Recommendation
Recommend a strategy for achieving the 2008 target profit? Explain your reasoning. What are the long-term strategic implications of your recommendation?
E. Pro Forma Income Statement
Using “Exhibit 10: Regnante’s Template for Developing a 2008 P&L Budget,” develop a pro forma income statement based on your recommendations. Explain your calculations, assumptions, rationale, and implications in the column with the heading “Notes for 2008 Calculations.” Give a brief summary of your pro forma income statement in the text of your write-up and include the pro forma income statement (following Regnate’s template) as an appendix.
Appendix E: 2008 Pro Forma Income Statement (All dollar totals are in 000’s of dollars)
2007E 2008 Notes for 2008
(e.g., calculations, assumptions, rationale, implications)
Manufacturer’s Price Per Case
8 oz. $7.22
1 lb. $12.02
5lb. $54.28
FactoryShipments(in000’sofcases)
8 oz. 714
1 lb. 1,226
5lb. 648
VariableManufacturingCost Per Case
8 oz. $3.38
1 lb. $5.58
5lb. $24.80
Gross Sales $55,051
Variable Manufacturing Costs $25,325
Gross Margin $29,726
54%
Advertising
TV $3,815
Print $694
Internet $248
Total Advertising $4,757
PR/MediaProductionCosts $198
Consumer Promotion $551
Trade Promotion $5,505
Total Marketing Expenses $11,011
Profit before SG&A, OH and taxes $18,715
34%
Note: You must submit this table as part of your case. Do not add or delete columns or rows from the table. I import your table into Excel to verify your calculations and changing the table will throw off the import. Input your values into the 2008 column so that their formatting matches the 2007E column. If a price is carried out to two decimal places in 2007E, carry it out to two decimal places in 2008. If is rounded to the nearest whole unit in 2007E, round it to the nearest whole unit in 2008.