Building a Market Model and Market Sizing

Why do we need to do market sizing?

1. OBJECTIVE OF MARKET SIZING

• Understand the business and the market environment

• Identify growth opportunities

• Measure the size of the opportunity and prioritise

• Set the business strategy and define where to grow

(Qualitative knowledge to quantitative knowledge)

Critical tool and methodology in Strategy Design

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Step 5Step 4Step 3Step 2Step 1Step 0

Understand the issue

Gather available sources

Decide the relevant details

Build the framework and structure the model

Complete the model

Check the integrity

Market sizing has five steps

2. APPROACH TO MARKET SIZING

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Step1. Gather available sources

2. APPROACH TO MARKET SIZING

Industry Report Competitor Data Client Data

General Sources

• AC Nielsen / Aztec

• IBIS / BIS Shrapnel / Freedonia / Market Research etc

• Broker report

• Industry Association

• Press Release

• Competitor Annual Report

• Websites

• Yellow pages

• Client Financial

• Internal Study

• Customer survey

Interviews

Interviews are essential for gathering and validating data

• Experts

• Industry Association

• Ex- exployees • Marketing

• Field sales

• Workshop

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Step2. Decide the relevant details

2. APPROACH TO MARKET SIZING

A. Relevant Segments

• Product (Category)

• Channel

• Customer

• Geography

• Player

B. Time Period

• Historical

• Forecast

C. Data detail required

• Market Volume

• Market Retail Sales Value (RSV)

• Market Wholesale Value (NSV)

• Market Profit (GM, EBIT, EBITDA)

Based on Step0. key questions can be answered...

Critical to define the scope and the structure before building model

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Product (Category)

Soft DrinksFlavoured

MilkJuices

Packaged Water

Energy Drinks

Sport Drinks RTD Tea Other

The largest category

Strong in ICFast

growingFast

growing

Channel

QSR/ National

Fast Food/Food

Courts

Take Away Food/

Kiosks/ Bakery

Route Non Food HELGrocery &

ConvenienceHoreca Vending3

Immediate Consumption (IC) G&P Horeca Vending

Step2. Decide the relevant details – Example in the beverage industry

2. APPROACH TO MARKET SIZING

Competitor

A B C D Other

Market Leader 20% Share 10% Share Strong in Energy

Example

Geography X Y Z A B C

Customer <11 yrs <21 yrs <31 yrs <51 yrs <71 yrs >=71 yrs

A. Defining SegmentsIdentify strategic opportunities and relevant segments in Australia

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B. Time Period

• Historical

• Forecast

C. Data detail required

• Market Volume

• Market Retail Sales Value (RSV)

• Market Wholesale Value (NSV)

• Market Profit (GM, EBIT, EBITDA)

• Data availability• Internal request

“Profit pools” are ultimately where business derive value

A. Relevant Segments

• Product (Category)

• Channel

• Customer

• Geography

• Player

Step2. Decide the relevant details

2. APPROACH TO MARKET SIZING

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Gross Margin (GM)

Channel

Cat

egor

y

Gross Margin (%)

Channel

Cat

egor

y

Market Value (NSV)

Channel

Cat

egor

y

Retailer Margin (%)

Channel

Cat

egor

y

Value Share (RSV%)

Segment

Cat

egor

y

Market Value (RSV)

Channel

Cat

egor

y

Price (RSV/L)

Channel

Cat

egor

y

Volume (L)

Channel

Cat

egor

y

Volume Share (%)

Competitor

Cat

egor

y

Key assumption should be identified and validated through the whole process

Step3. Build the framework and structure the model - Current

2. APPROACH TO MARKET SIZING

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2010 market

Channel

Cat

egor

y

2005 market

Channel

Cat

egor

y

2006 market

Channel

Cat

egor

y

2007 market

Market size projection 2007-10

• Forecast Volume & Price based on historical 2004-06 growth by Category x Segment

2009 market

Channel

Cat

egor

y

2008 market

Competitor

Cat

egor

y

Cat

egor

y

• Historical trends• Individual interviews• Workshop• Macroeconomic data• Other growth drivers

Competitor

Step3. Build the framework and structure the model – Historical & Forecast

2. APPROACH TO MARKET SIZING

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A. Client Financial

• Financial Detail Mapping

B. Industry Report / Competitor data

• Scan Data Mapping

• Filling up the gap

C. Interviews

• Build the scenarios

Which data has higher confidence??

How reliable is it?

Who do I need to interview?

Which data is missing?

What do I need to ask?

Any data is against each other?Is it covered same scope?

Step4. Complete the model & Step5. Check the integrity - Review the data source before applying on the model

2. APPROACH TO MARKET SIZING

Model has to be validated / challenged both for integrity reasons and buy-in

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Conclude initiativesAnalyze

the reason whyValidate FindingsFindings

• What is the largest category or channel?

• Who is the market leader in X channel?

• Which category is strong in WA?

• What are the main changes?

• Does it match with interviews and other reports?

• Why X category is growing fast?

• Why Y channel volume is declining?

• What is the background of X trend?

• Target X category in Z channel

• Improve service in Y channel

Communication is critical (Workshop etc..)

Hand over the ownership of findings

3. DRAWING CONCLUSIONS FROM MARKET SIZING

3. DRAWING CONCLUSIONS FROM MARKET SIZING

This is only a partial view of the full presentation. For further details and download please goto: www.straticx.com/store.html

This is only a partial view of the full presentation. For further details and download please goto: www.straticx.com/store.html