St Ive\'s Body Wash

$Page 1: St Ive\'s Body Wash$
Team B1Jeremy Blanchard • Molly Brown • Paul Kim • Pingnan Li • William Peterman • Ioli Stathi-Dedaki

Integrated Product Management Project

Introduction Alberto-Culver Industry SWOT Recommendations

Body Wash Category

52 Weeks Ending 06/19/04





0

50

100

150

200

250

300

350

Body Wash Category

Sales UnitsSales Dollars

Mil

lion

Growing Steadily Replacing Deodorant Bar Soaps

Current Body Wash Market

Lucrative: $400MHighly Fragmented: 475 Products with Sales

DOVE DIAL OLD SPICE SUAVE OLAY SOFTSOAP AXE ST. IVES0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

Sale

s

7.7%6.24% 6.22% 5.9% 5.8% 5.4%

3.9%

9.9%


Market GrowthFast GrowingSt. Ives: Stagnant Sales

2005 2006 2007 P20080

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

AXEDIALDOVEOLAYOLD SPICESOFTSOAPST. IVESSUAVE

Sale

s ($)


RecommendationsIntroduction Alberto-Culver Industry SWOT Recommendations

Phase 1

Reduce SKUs

Reduce Price

Identity Development Program

Alberto-Culver Overview

• Target the Ethnic MarketStrategy

• Focus on Core CPG BusinessStructure

• President Carol BernickStyle


Creating Demand Beyond Utilitarian Need for Cleanliness


St. Ives

Facial Hand & Body Lotion Body Wash

Healthy/Revitalized

Firmer & Younger

Healing & Natural

Fragrant & Silky

Porter’s 5 ForcesIntroduction Alberto-Culver Industry SWOT Recommendations

Consumer Trends

African-Americans:Ideal target demographic

for St. Ives

Least Expensive All Natural Eco-friendly Extra Moisturizers0%5%

10%15%20%25%30%35%40%45%50%

What Kind of Soap Do You Buy?

White Black

Hispanic

2008

0%5%

10%15%20%25%30%35%40%45%50%

What Brand of Soap Do You Buy?

WhiteBlackAsianHispanic


Competitive Field

Strong Brand Images


http://images.google.com/imgres?imgurl=http://bp2.blogger.com/_W0oS8lOI3NU/Reipwp0is9I/AAAAAAAAAXE/zVyI_Jbolsw/s320/Logo_dove.gif&imgrefurl=http://nymieg.blogspot.com/2007_03_01_archive.html&usg=__lns0H2_BUvfWOt_QGR_tMycLZQY=&h=83&w=199&sz=4&hl=en&start=3&um=1&tbnid=SaSE3WCavIkQaM:&tbnh=43&tbnw=104&prev=/images?q=dove+soap+logo&ndsp=21&um=1&hl=en&sa=N

http://images.google.com/imgres?imgurl=http://www.francosupermercado.com/images/logo_old_spice.jpg&imgrefurl=http://www.buscape.com.pe/desodorantes--orderby-loja--pg18.html&usg=__Qnl5RNcefQSjrpfJrWCUOuRKw5c=&h=230&w=230&sz=24&hl=en&start=14&tbnid=yok4Qmc-JfaxAM:&tbnh=108&tbnw=108&prev=/images?q=old+spice+logo&gbv=2&hl=en&safe=off

http://images.google.com/imgres?imgurl=http://www.pg.com/images/product_card/v3/related_logos/logo_olay.gif&imgrefurl=http://www.pg.com/product_card/prod_card_main_safeguard.shtml&usg=__qGMjso8jHhRq8sxyuxbg-Ey0tH8=&h=63&w=63&sz=1&hl=en&start=15&um=1&tbnid=bRE8sWGgppyXnM:&tbnh=63&tbnw=63&prev=/images?q=olay+soap+logo&um=1&hl=en&sa=G

Marketing StrategiesAXE

“Any excuse to get dirty”College Age Men Baby Boomer Echoes

SUAVE“Suave knows mommy needs to play princess too”

Middle Aged MothersPrice conscious Generation X Mothers

DOVE Pro-Age“Dove believes in pro-age, not anti-age”

Aging Female Baby-Boomer population


Who is the St. Ives

consumer?

What is its brand

message?

How does St. Ives create value for its consumer?

What Does St. Ives Represent?Introduction Alberto-Culver Industry SWOT Recommendations

StrengthsoAlberto-Culver’s financial stability oGrowing industry

WeaknessesoDeclining market shareoConcentrated customer base

OpportunitiesoRestructuring initiativesoDemographic trends

ThreatsoEconomic recessionoIntense competition


Brand Identity

Increase Trials to Improve Conversion Ratio

Dove Suave St. Ives0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Brand Awareness


10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Brand Trials


10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Conversion Ratio


Brand Identity


5%

10%

15%

20%

25%

30%

35%

40%

45%Most Frequently Purchased


5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Retention Ratio

St. Ives is Unable to Recruit Loyal Consumers



10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Brand Trials


Cool Blue

Fresh H2O

Swiss Vanilla

Soy Milk & Lotus Blossom

Cucumber

Energizing Citrus

Whipped Silk

Mineral Therapy

Apricot Exfoliating Vitamin E

Collagen Elastin

Oatmeal & Shea Butter

Reduce SKUsFocus Brand Image

Seasonal Scents

6 Standard

SKUs

Swiss Vanilla

Energizing Citrus

Spring - Summer


Fall - Winter

Seasonal ScentsSwiss Vanilla Energizing Citrus

Associated with:HomeFoodSecurityWarmth SoftnessPurity

Evokes A Sense of Well-being

Refreshing Qualities

Providing Relief for:BodySoulSpirit

Stimulating Effects


Pricing Revision Strategy

St. Ives’ Current Pricing Strategy

Olay Dove St Ives Suave Softsoap Dial0

1

2

3

4

5

6

Price

$


Market Opportunities

Recessions Encourage Consumer FrugalityConsumers Enjoy Trying Different Brands

0%

5%

10%

15%

20%

25%How Often Do You Buy This Brand?

Most Often2nd Most OftenSometimes

2007


2.4 2.6 2.8 3.0 3.2 3.4 3.6240,000

300,000

360,000

420,000

480,000

540,000

600,000R² = 0.801753558466761

Price

Units

Correlation = -0.924

Optimal Pricing PositionIntroduction Alberto-Culver Industry SWOT Recommendations

St. Ives Optimal Price is $2.99

Price Reduction

Communication– 10% off regular price

Impact– Increase Retail Sales

by $2M (14.3%)


Sensitivity Analysis

Close Competitors Reaction to Price Change

NPV of Price Reduction $2.30M

Correlation MatrixSuave St. Ives Dove Dial

Suave 1.00St. Ives 0.316 1.00Dove -0.298 -0.117 1.00Dial 0.212 0.027 0.295 1.00


Scent PreferencesSpring Summer Fall Winter

1st Citrus52%

Citrus64%

Vanilla37%

Vanilla46%

2nd Floral40%

Fruity47%

Almond35%

Almond27%

3rd Fresh Linen39%

Fresh Linen41%

Fresh Linen29%

Fresh Linen27%


Fresh Linen is a Year Round Favorite


Current Bottle is Bland and Uninspired25% Increase in Excitement

New Bottle Design Equals Differentiation

Current PositioningIntroduction Alberto-Culver Industry SWOT Recommendations


MRI Score for Magazines: 141

MRI Score for Television: 85


Sunday PresenceIntroduction Alberto-Culver Industry SWOT Recommendations

Cultural Crisis

Restructure

Clear Mission & Values

Education

WomenChildren


Corporate Social Responsibility

Corporate Social Responsibility

St. Ives Gives Back!

Seasonal SKUsSwiss VanillaEnergizing Citrus

Sticker on the PackageShelf Talkers


Donate 10% of the Regular Price

Projected Financial Results: Beta & WACC

0.057 0.3120.35

0.5

* 3.16% 0.35 5.7% 5.17%E fr r risk premium

2.295.17% 5.17%

867,000 2.29wacc E D

E D billionr r r

E D E D billion

Correlation Matrix

Alberto-Culver S&P 500

Alberto-Culver 1.000 　S&P 500 0.312 1.000

Summary Statistics

　 Alberto-Culver S&P 500

Count 24.000 24.000Mean 0.004 -0.018Median 0.013 -0.009Standard deviation 0.057 0.050


NPV of Pricing Strategy

All Numbers in Millions of Dollars 2009 2010 2011 2012 2013

Increased Sales Due to Pricing Adjustment $2.15 $2.3 $2.48 $2.66 $2.85

Less Retail Margins $1.57 $1.68 $1.81 $1.94 $2.08

Less Distributor Margins $1.33 $1.43 $1.54 $1.65 $1.77

Less Cost of Goods Sold $0.69 $0.74 $0.80 $0.86 $0.92

Less Taxes $0.47 $0.50 $0.54 $0.58 $0.62

NPV $0.44 $0.45 $0.46 $0.47 $0.48

Total NPV $2.30


Assumption for Alberto-Culver Perpetuity growth rate 3.6%

Tax rate 32.96% SGA/Sales 40.91%

r-wacc 5.17% changes in NWC/Sales 0.83%

Gross margin 52.46% Beta 0.35

Depreciation/Sales 1.73% % margin

changes in NWC/Sales 0.83% retailer 27%

Capital Exp/Sales 4.33% wholesaler 15%

Incremental Earnings Forecast ($millions)

Year 2009 Beginning of 2010

2010 2011 2012 2013 2014 perpetuity

Growth rate 8.1% 7.1% 7.0% 7.0% 7.5% 3.6%

Sales (millions) 2.34 2.51 2.68 2.87 3.09 203.78

Cost of sold good

Gross profit (millions) 1.23 1.32 1.41 1.51 1.62 1 106.91

SG&A 1.17 1.19 1.21 1.23 1.26 83.37

Depreciation 0.04 0.04 0.05 0.05 0.05 3.52

EBIT 0.02 0.09 0.16 0.23 0.30 20.01

Income tax rate 32.96%

Unlevered net income 0.01 0.06 0.10 0.15 0.20 13.41

Plus depreciation 0.04 0.04 0.05 0.05 0.05 3.52

Less capital expenditures 0.10 0.11 0.12 0.12 0.13 8.83

Less changes in NWC 0.02 0.02 0.02 0.02 0.03 1.68

FCF -0.07 -0.03 0.01 0.05 0.10 6.43

R-wacc 5.17%

NPV ($millions) 4.05 4.26


NPV of Fresh Linen

3.0 4.02.01.0 5.0

Units sold (millions/year)

SGA&/Sales(%)

MSRP Price ($/unit)

1.63 1.86 1.98

1.1 1.26 1.39

60% 50% 41%

NPV ($million)

Parameter Initial assumption Worst case Best case

Units sold (millions) 1.26 1.1 1.39

MSRP Price($/unit) 2.99 2.63 3.19

Wholesale price ($/unit) 1.86 1.63 1.98

SGA/Sales(1st year) 50% 60% 40.91%


NPV of Fresh Linen – Sensitivity Analysis

Parameter Initial ($millions) Worst case ($millions) Best case ($millions)

Units sold 4.05 3.4 4.62

MSRP Price 4.05 3.44 4.26

SGA/Sales 4.05 3.7 4.36

Strategy MSRP($/unit)

Wholesaler Price($/unit)

Expected Units Sold(millions)

NPV($ millions)

Current strategy 2.99 1.86 1.26 4.05

Price reduction 2.69 1.67 1.34 3.86



Price increase 3.09 1.92 1.19 3.96

Price increase 3.19 1.92 1.11 3.78

Price increase 3.29 2.04 1.02 3.58


NPV of Fresh Linen – Scenario Analysis

0.0

1.0

2.0

3.0

4.0

5.0

2.6 2.8 3.0 3.2 3.4

MSRP Price($/unit)

NP

V($

millio

ns)

Correlation = -0.605


Pricing Revision Fresh Linen Total NPV0

1

2

3

4

5

6

7

2.3

4.05

6.35N

PV ($

Mill

ions

)

NPV of Projects

Phase 1

•Reduce SKU•Reduce Price

Phase 2

•New Bottle•Fresh Linen

Advertising

•Magazine Ads•Promotions


Questions & Answers

• “Soap, Bath and Shower Products – US – October 2008” Mintel Oxygen. 2008. Mintel Group. October 2008 <http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/subject/view=reports_category&levels=9065/cat_items/cat=25&type=RCItem&mode=future&list=cat_items/display/id=296669>.

• “Soap, Bath and Shower Products – US – August 2007” Mintel Oxygen. 2007. Mintel Group. August 2008 <http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/subject/view=reports_category&levels=9065/cat_items/cat=25&type=RCItem&list=cat_items/display/id=226616

• AC Nielsen• Braverman, L. (2008). Standard & Poor’s Industry Surveys (Household Nondurables). New York: McGraw-Hill • Datamonitor (2007). Industry Profile (Bath & Shower Products in the United States). Reference code: 0072-0012• http://query.nytimes.com/gst/fullpage.html?res=9504E5DF123AF931A15754C0A9679C8B63&sec=&spon=&pagewanted=all• http://www.businessweek.com/magazine/content/04_44/b3906117.htm• Marketer’s Guide to Media 2007. Nielsen Business Media. New York, NY• Berk, Jonathan and DeMarzo, Peter. Corporate Finance. Boston: Pearson Education Inc. 2007, 391• http://finance.yahoo.com/q/hp?a=&b=&c=&d=11&e=11&f=2008&g=d&s=ACV• Alberto-Culver Annual Report 2007• MRI Mediamark Reporter, Mediamark Research Inc. (mriplus.com). • TNS Media Intelligence 2007 – Ad $ Summary. Magazine Publishers of America. New York, NY• http://www.sirc.org/publik/smell_vanilla.html• http://www.vanilla.com/html/leg-calmdown.html• http://www.content4reprint.com/beauty/citrus-oil-for-electrically-tuned-skin-cleansing.htm• http://www.alberto.com/company/overview.aspx• Alberto Culver Annual Report 2007• Bernick, Carol. Marino, Jim. Memo to The Alberto-Culver Consumer Products Team. 10 January 2006.

<http://www.secinfo.com/d14D5a.v5ct.htm>.• Qualtrics Survey• Datamonitor (2008). Company Profile. New Alberto-Culver Company. June 19, 2008.

http://web.ebscohost.com.ezproxy.bu.edu/bsi/pdf?vid=5&hid=15&sid=2da62ad7-82ba-49e0-8a81-f016e50a7cbd%40SRCSM2• http://www.etsy.com/view_listing.php?ref=sr_gallery_15&listing_id=13023089\• 1. Aaker, Jennifer L. “Dimensions of Brand Personality.” Journal of Marketing Research, Vol. 34, No.3 (August 1997), pp.347-357.• Media Release. The Swiss Cross: a purchasing motive. McCann Erikson, University of St.Gallen. 18 June 2008.

<http://www.unisg.ch/hsgweb.nsf/df76d44a9ef44c6cc12568e400393eb2/668b6bb00866f671c125746b00478f25/$FILE/media%20release%20Swissness%20Worldwide,%2018.06.2008.pdf>.

http://www.businessweek.com/magazine/content/04_44/b3906117.htm

http://www.sirc.org/publik/smell_vanilla.html

http://www.etsy.com/view_listing.php?ref=sr_gallery_15&listing_id=13023089/