Culinarian CookwareCulinarian Cookware Pondering Price Promotion Pondering Price Promotion

Group 6:Group 6:

Aditi SachdevaAditi SachdevaChandra PrakashChandra Prakash

Devendra S PalDevendra S Pal Dinesh KumarDinesh Kumar

John TopnoJohn TopnoSumita DasSumita Das

ContextContext Culinarian’s leadership position in Premium segment of the Culinarian’s leadership position in Premium segment of the

US cookware market US cookware market

Attractive growth in cookware market Attractive growth in cookware market

Pride in being an elite brand – “an American Icon” Pride in being an elite brand – “an American Icon”

CEO’s clear objective of preserving prestigious image CEO’s clear objective of preserving prestigious image

Top management not too keen on price promotionsTop management not too keen on price promotions

Culinarian’s ProductCulinarian’s Product Mix Mix The Tyro Collection (CX1) The Tyro Collection (CX1)

Lowest priced Lowest priced Least advance technologyLeast advance technology

The Classic Collection (DX1)The Classic Collection (DX1) Aluminium exterior and centreAluminium exterior and centre

Advance Chef Collection (SX1) Advance Chef Collection (SX1) Stainless Steel exterior with Aluminium centreStainless Steel exterior with Aluminium centre

Professional Grade Collection (PROX1)Professional Grade Collection (PROX1) Most expensive line of products Most expensive line of products Patented Copper Construction technologyPatented Copper Construction technology

ProblemProblem

Traders’ and sales force’s feedback to go in for price Traders’ and sales force’s feedback to go in for price promotions promotions

Differing opinions of Janus & Brown on the 2004 price Differing opinions of Janus & Brown on the 2004 price promotion results promotion results

Janus’ apprehension that price promotion not resulting in Janus’ apprehension that price promotion not resulting in new customer acquisition and merely going in trade new customer acquisition and merely going in trade overbuy, forward purchase by existing consumers overbuy, forward purchase by existing consumers

What type of promotion to do in 2007? What type of promotion to do in 2007?

2007 Promotion Plan2007 Promotion Plan

Alternatives :Alternatives : Go with Price promotionGo with Price promotion No Go with Price PromotionNo Go with Price Promotion Search for third alternativeSearch for third alternative

Analysis of 2004 price promotion necessary to decide 2007 promotion programme

2004 price promotion – Analysis of 2004 price promotion – Analysis of ‘Bones of Contention’‘Bones of Contention’

Point of difference Our comments

Calculation of normal sales figures

Normal sales figures are arrived at looking at sales figures for a number of years and not only immediately preceding year

Cannibalization of DX1 series during promotion

May or may not have been due to promotion as there was a problem on Aluminium availability in 2004

Savings due to inventory reduction Tangible saving – to be included

Inclusion of SG&A expenses in variable costs

Does not make much difference as it would affect the calculations equally (for promoted and non promoted)

Sales of Cookware : GrowthSales of Cookware : Growth

-5

0

5

10

15

20

25

30

2003 2004 2005 2006

US Retail Sale Culinarian

March to May 2004March to May 2004 As per ConsultantAs per Consultant Brown @ -24%Brown @ -24%

UnitsUnits 119,504119,504 59,87159,871

Contribution With PromotionContribution With Promotion $1,914,615$1,914,615 $1,914,615$1,914,615

Contribution Without PromotionContribution Without Promotion $ 2,384,105$ 2,384,105 $ 1,194,432$ 1,194,432

ProfitProfit $ (469,489)$ (469,489) $720,183$720,183

Negative growth Negative growth 2% industry 2% industry wide for the wide for the aluminum aluminum cookwarecookware

2004 Price Promotion – How 2004 Price Promotion – How numbers add upnumbers add up

Non promoted Promoted

Average unit contribution 19.95 10.35

Quantity sold (March-May)

102,413 184,987

Total contribution 2,043,139 1,914,615

Savings due to inventory - 39,540

Total Profit 2,043,139 1,954,155

Actual quantity March – May 2002

91,247

Act. Qty M-M 2003 78,779

%growth spring y-o-y 2003 30%

Forecast qty for M-M 2004 1.3*78,779 = 102,413

2004 Price Promotion – Outcome 2004 Price Promotion – Outcome AnalysisAnalysis

Objective Outcome

Broadening of the customer base

Stimulate excitement for brand at consumer level

Appeasement of trade At what cost

Promotion Pass Through75%

(50% retailers passed only 10% discount to customers)

HOW PROMOTIONS AFFECT SALES – did it happen HOW PROMOTIONS AFFECT SALES – did it happen for Culinarian in 2004?for Culinarian in 2004?

Brand Switching – no visible impactBrand Switching – no visible impact

Repeat Purchasing - yesRepeat Purchasing - yes

Purchase acceleration – possibly yesPurchase acceleration – possibly yes

Category expansion - NoCategory expansion - No

Alternative 1 : Price PromotionAlternative 1 : Price Promotion Brand SwitchingBrand Switching –Price ranked –Price ranked

the third important criteria for the third important criteria for the purchase of cookware.the purchase of cookware.

Repeat Purchase-Repeat Purchase- 50% would 50% would favor a brand they recognized.favor a brand they recognized.

Since LeGourmand and Robusto Since LeGourmand and Robusto never ran price promotions , never ran price promotions , there can be an element of there can be an element of excitement excitement and new consumers and new consumers may be willing to try the productmay be willing to try the product

Category ExpansionCategory Expansion: Possibility : Possibility of increase in total consumption of increase in total consumption of the product categoryof the product category

PROS

Tendency of traders to withhold Tendency of traders to withhold the discount meant for the discount meant for customers customers

Non-Premium products ran Non-Premium products ran regular price promotions – risk regular price promotions – risk of losing premium imageof losing premium image

Real possibility of change in Real possibility of change in reference price reference price

Negative attribution likely – Negative attribution likely – transition from self perception transition from self perception to object perceptionto object perception

CONS

2007 Promotion Plan

CX1 Retail Price 150.00 120.00 135.00

Retail Margin 78.00 57.60 64.80

Av. Mf. Price 72.00 62.40 70.20

VC 52.05 52.05 52.05

Av. Contribution 19.95 10.35 18.15

Spring 2007 Spring 2006 Disc @ 20% Disc @ 10%

Unit Orders ('000) 166.60 210.50 210.50

With Promotion ('000 $)   2179 3821

Without Promotion ('000 $)  3324 3324 3324

Profit ('000 $)   -1145 497

Assuming Retailers margin @ 48% and Growth in sale 26%.

Revenue Growth @ 15%,

Alternative 2 :Gift with PurchaseAlternative 2 :Gift with Purchase

Precedent of 15% incremental Precedent of 15% incremental sales (on Culinarian’s GWP) sales (on Culinarian’s GWP)

Reference price does not Reference price does not changechange

Other premuim competitors Other premuim competitors successfully running promotion successfully running promotion of GWPof GWP

Possibility of promoting Possibility of promoting stagnating PROX1 and SX1 stagnating PROX1 and SX1 lineslines

PROS

Traders not happy with this Traders not happy with this promotionpromotion

Imitation of competitorsImitation of competitors

CONS

ProposalProposal

Gift with purchase on all the product linesGift with purchase on all the product lines Minimum purchase of $600 for PROX1 & SX1 Minimum purchase of $600 for PROX1 & SX1

and $400 for CX1 & DX1. and $400 for CX1 & DX1. The gift for both categories to be different The gift for both categories to be different

(perceived value of the gift for PROX1/SX1 to (perceived value of the gift for PROX1/SX1 to be higher).be higher).

Timing : Either May/June or Nov/Dec Timing : Either May/June or Nov/Dec

Thank youThank you