RURAL SCRUB

Synergy is the key operating word when it comes to acquisitions. As a brand manager, when you are e looking to extend the line, its very important to ensure that the brand you are acquiring gives a synergy with your existing portfolio. Your company manufactures and markets toilet soaps. Your Organisation is known for its good distribution strength and has a strong presence in rural markets (in addition to an equally strong presence in urban markets). Your competitors have an equally good distribution in urban areas (towns and cities) and hence give a strong fight in these areas. However, you clearly dominate them in rural areas because of the strength of your distribution channel vis--vis theirs. In addition, the company takes great pains in building brands as they feel that this is the best long-term option as opposed to shortterm spurts in growth by artificial means. The company has made a policy decision to enter into the market for detergents because of the obvious distribution synergy it offers. In addition, the market size of detergents is large (20 lakh tonnes valued at approximately Rs. 1300 crores). As a Brand Manager in charge of a toilet soap, you have been asked by your Group Product Manager to evaluate some brands of detergents that your Organisation is planning to acquire. Exhibit 1 gives the market shares enjoyed by the various brands of detergents (by weight ). Exhibit 2 gives the consumer prices of the brands. Exhibit 3 gives the trial rates induced by the brands and is given as the number of consumers who have tried the brand in the past. Exhibits 4 and 5 give the break up of sales for each brand over different income categories and town categories respectively. Exhibit 6 gives the margins given to retailers for different brands. The brands that are available for acquisition are given in Italics and are underlined. You may assume that all detergents are sold in the same size. Your assignment: Draw up criteria to evaluate the alternate brands available for acquisition. (08 Points). 2. Evaluate these brands across the above criteria and suggest the brand(s) to be acquired. (12 Points). 3. Estimate the segment sizes (by weight) of the different income categories AND the segment sizes (by weight) of villages, towns and cities. From this data, what inferences can you draw about the key tasks at hand after acquiring the brand(s) of detergent(s)? (20 Points). 4. If the Net Profit Margin (after tax) was 6% on all the brands available for acquisition and the prevailing P/E is 32, what would be the going rate price for this/these brand(s) chosen in Answer 2? (10 Points)
1.

Exhibit 1

Exhibit 4

Market Shares

% of Sales over Income Categories LIG MIG 32.20 % 37.23 % 34.23 % 41.34 % 43.23 % 22.32 % 41.23 % 14.00 % HIG 64.60% 54.32% 53.56% 42.34% 38.42% 12.34% 27.65% 18.87%

Take-You-To-The Cleaners Wishy-Washy

28.54% 23.47 % 11.85% 9.58% 7.39% 7.38% 5.47% 1.54%

Take-You-To-The Cleaners Wishy-Washy

3.20% 8.45% 12.21% 16.32% 18.35% 65.34% 31.12% 67.13%

Eyewash
Hogwash

Eyewash
Hogwash

Hath Ki Safai Pair Ki Safai Wash Out India vs England (Dhulai)

Hath Ki Safai Pair Ki Safai Wash Out India vs England (Dhulai)

Exhibit 2 End Consumer Prices (100 gms.)

Exhibit 5 % of Sales over Town Categories Villages Towns 34.00 % 35.43 % 45.32 % 32.34 % 39.17% 42.32 % 51.23% 34.00 % Cities 36.20% 59.86% 47.22% 55.34% 48.42% 28.34% 22.65% 10.87%

Take-You-To-The Cleaners Wishy-Washy

6.50 6.25 7.00 6.50 7.50 6.60 6.40 7.25

Take-You-To-The Cleaners Wishy-Washy

29.80% 4.71% 7.46% 12.32% 12.41% 29.34% 26.12% 55.13%

Eyewash
Hogwash Hath Ki Safai

Eyewash
Hogwash Hath Ki Safai

Pair Ki Safai Wash Out India vs England (Dhulai)

Pair Ki Safai Wash Out India vs England (Dhulai)

Exhibit 3 Trial Rates

Exhibit 6 Retailer Margins (in Ps.) per piece Credit (days)

Take-You-To-The Cleaners Wishy-Washy

Eyewash Hogwash

53.62 % 48.30 % 44.90 % 20.97%

Take-You-To-The Cleaners Wishy-Washy

0.26 0.27 0.42 0.33

7 7 12 10

Eyewash Hogwash

Hath Ki Safai Pair Ki Safai Wash Out India vs England (Dhulai)

41.22 % 14.43 % 12.83% 26.39 %

Hath Ki Safai Pair Ki Safai Wash Out India vs England (Dhulai)

0.56 0.33 0.32 0.73

21 7 10 30

Best of Luck!