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Investment in Crest Whitestrips Advanced Seal

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by

Jessica Kreuzer

on 1 April 2014

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Transcript of Investment in Crest Whitestrips Advanced Seal

Base Case
Procter & Gamble: Investment in Crest Whitestrips Advanced Seal
Introduction
Founded October 31, 1837 by William Procter (a candlemaker) and James Gamble (a soapmaker)
Headquartered in Cincinnati Ohio
P&G is one of the world’s premier consumer goods companies.
P&G has a wide range of brands in beauty, grooming, and houshold care
P&G’s 50 Leadership Brands are some of the world’s most well-known household names.
Represent more than 90% of P&G sales and profits.
25 of these 50 brands are Billion- Dollar Brands
Crest represents $5 billion of annual portfolio sales of NAOC

Whitman's Proposal
Increase the initial media plan and decrease price by $1 to accelerate sales.
Increase Household Penetration
Advertise more in first year
Increase budget by $1.5 mil in the first year
As a result unit sales will go up by $1.25 million (3.25 million units per year)
The Problem
Tam's Counterpoint: Cannibalization
Recommendation
Tam's Counterpoint
Cannibalization is going to be 50%-65%
Original assumption was 50%-60%
Suggestion is to
Reduce advertising by $1 million per year
Raise the price by $1 ($23 per unit)
This will lower the cannibilization rate to 45%
However, it will reduce the appeal of the project itself and will focus on a specific consumer niche.
Procter and Gamble Brands
The Original Crest Whitestrips
Crest Whitestrips was launched in 2001 and allowed consumers to achieve whitening results that rivaled more expensive treatments.
$300 million in annual sales, but virtually no growth in sales or profit after the first year.
Due to the abrupt halt in growth, Crest attempted multiple line extensions had failed to significantly improve results.
Major customers became skeptical after failed line extensions

NPV of Increasing Advertising Proposal
NPV of Proposal to Minimize Cannibalization
Key Questions
Calculation Assumptions
Whitman's Proposal
Increase Household Penetration
Advertise more in first year
Increase budget by $1.5 mil in the first year
Lower price per unit by $1 ($21 per unit)
As a result unit sales will go up by $1.25 million (3.25 million units per year)

Total Advertising: $6 million
Unit Price: $22 per unit
Cannibalization Rate: 50%-60%
Does this pay out for our business?
Are we financially better off launching this project or not?
What are the risks?
What do we need to be thinking about as we design this?
How much working capital do we need on hand at the market launch date?
How does cannibalization affect the profit margins we allow?

Whitestrips Advanced Seal
Investment in Crest WhiteStrips Advanced Seal
Procter & Gamble
Presented by:
Evan Barry, Adam D’Amore, Jessica Kreuzer, Maria Mellody

Sell Advanced Seal Crest Whitestrips at $22 per unit and assume:
2 million units sold
$12 cost of goods sold expenses (per unit)
$6 million advertising expense per year
50%-60% cannibalization from existing Whitestrip sales
Prevent cannibalization by focusing marketing on untapped customers and raising the price by $1 to offset gross profit differential.

This will lower the cannibilization rate to 45%
Reduce advertising by $1 million per year

"The tendency of Whitestrips to slip off teeth is the number one barrier to repeat purchase and word-of-mouth recommendation."
Base Case
NPV of Base Case
Whitman's Proposal
Tam's Counterpoint: Cannibalization
Always Anna Sui Aussie
Braun Camay Christina Aguilera Perfumes
Clairol Professional CoverGirl Crest
DDF Dolce & Gabbana Cosmetics Dolce and Gabbana Fragrances
Dunhill Fragrances Escada Fragrances Fekkai
Fusion Ghost Gillette
Gucci Fragrances Hugo Boss Fragrances Head & Shoulders
Herbal Essences Ivory Lacoste Fragrances
MACH3 Naomi Campbell Natural Instincts
Nice ‘n Easy Nioxin Olay
Old Spice Oral-B Pantene
Pert Prestobarba/Blue Puma
Rejoice SK-II Safeguard
Scope Sebastian Professional Secret
Tampax Venus Vidal Sassoon
Wella





Beauty and Grooming
Ace Align Ariel
Bold Bounce Bounty
Cascade Charmin Cheer
Comet Dash Dawn
Downy Dreft Laundry Duracell
Era Eukanuba Febreze
Gain Iams Joy
Luvs Metamucil Mr. Clean
Pampers Pepto-Bismol Prilosec OTC
Pringles Puffs Swiffer
Tide Vicks
Household Care
BASE CASE
Full transcript