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Melanie’s Organic Marshmallows Marketing Plan
ADV 388K
Integrated Communication Management Dr. Cunningham
April 22nd, 2013
Hannah Scolnik Megan Jackson
Grace Fox Katie Doucet
Caitlin Cunningham
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Table of Contents Executive Summary.......................................................................................................................3
Strategic Focus and Plan...............................................................................................................4
Situational Analysis ......................................................................................................................6 SWOT ..........................................................................................................................................6
Industry Analysis and Trends ......................................................................................................8 Competitive Analysis...................................................................................................................9
Company Analysis .....................................................................................................................11 Consumer Analysis ....................................................................................................................12
Primary Data ..............................................................................................................................12 Secondary Data ..........................................................................................................................16
Product Market Focus.................................................................................................................19 Market and Product Objectives..................................................................................................19 Target Market.............................................................................................................................24 Points of Difference ...................................................................................................................24 Positioning Statement ................................................................................................................25
Marketing Program.....................................................................................................................26 Product Strategy.........................................................................................................................26 Price Strategy .............................................................................................................................27 Distribution Strategy..................................................................................................................28
Financial Data and Projection ....................................................................................................30 Financial and Marketing Goals..................................................................................................30 Summary of Marketing Strategy................................................................................................30 Three Year Projected Unit Sales and Revenues ........................................................................31
Evaluation and Control ...............................................................................................................32
References.....................................................................................................................................36 Appendix.......................................................................................................................................37
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Executive Summary
Melanie’s Organic Marshmallows captures the curiosity and taste buds of adults and children
alike across the Southern region of Texas. Marshmallow lovers have been waiting a long time for
a tasty, fluffy treat that is both gourmet and organic.
Melanie’s Organic Marshmallows brings forth the solution with the ultimate gourmet
treat made with all organic ingredients in a variety of 15 unique flavors. The product is
handcrafted with care by Melanie herself and offers a niche product offering within an expanding
market.
The overall goals and objectives include a successful entry into the organic gourmet
marshmallow market by gaining market share, increasing brand awareness, and creating a solid
distribution channel to retailers and an online presence in order to increase sales volume.
Melanie is eager to capture three percent of the overall gourmet marshmallow market in the state
of Texas in 2013.
The strategy elements include effectively identifying the demographic in order to target
sales efforts for the product. Additionally, the product design and packaging is an essential
strategy for appealing to the target market. The uniquely crafted product adds value and a
competitive advantage. The competitive pricing was set to appeal to the type of customers
Melanie’s Organic Marshmallows wants to attract and gain profitable margins. An online
presence is to be implemented in order to further generate brand awareness, engagement, and
sales.
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Strategic Focus and Plan
Mission
Melanie’s Organic Marshmallows’ mission is to provide hand crafted, gourmet, and organic
products with consistent quality and a variety of unique flavors to satisfy consumers in this fast-
growing market.
Goals
As a start up, Melanie’s Organic Marshmallows’ initial plan is to introduce her product
throughout the four main metropolitan areas of Texas: Dallas/Fort Worth, San Antonio, Houston,
and Austin. Once her gourmet marshmallows have penetrated the market successfully, the focus
will redirect to market and product line expansion. With the assumption that 1 bag of 15
marshmallows is 1 unit, Melanie’s Organic Marshmallows seeks to achieve the following goals:
Production Objectives
● Increase manufacturing and service capacity to increase her yearly profit.
● Provide quality products by assessing and ensuring premium organic ingredients are used
for making marshmallows each year.
● Establish production facilities in Austin, and streamline the distribution strategy by 2014.
● Starting in 2013, begin selling product online.
Financial Objectives
● Increase manufacturer’s selling price to maintain profitable margins and adapt to the
growing market in 2013.
● Make 90 percent of sales through supermarkets and specialty stores in Dallas, Houston,
San Antonio and Austin for the first two years.
● Execute long-term profitability by 2014.
● Exhibit positive cash flow within first three years of business.
● Generate long-term return on investment for Melanie and investors.
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Marketing Objectives
● Secure three percent of the overall Texas gourmet marshmallows market by 2013.
● In 2013 increase sales volume by 70,000 units to achieve market share objective.
● From 2013 to 2014, increase sales volume an additional 230,000 units to maintain market
share.
● Set advertising and promotion budget as 15 percent of total sales per year.
● Create customer value in order to gain and retain repeat customers annually.
● Implement an e-commerce website that accounts for 10 percent of sales in 2013. Increase
to 20 percent of sales by end of 2014.
Core Competency and Sustainable Competitive Advantage
Melanie’s Organic Marshmallows expansion will provide beneficial opportunities and
advantages in both the natural/organic and specialty food industries. This is the only organic and
gourmet marshmallow product on the market. Melanie’s Organic Marshmallows allows for
advancement in two major ways; (1) it will provide a gourmet organic option in the Texas
marshmallow market that appeals to an expanding potential market and (2) it will maintain her
ability to inexpensively produce and efficiently manufacture large quantities of organic
marshmallows to increase profitability.
In order to utilize her core competencies as a competitive advantage, Melanie must
streamline the company’s logistics and supply chain to more efficiently manufacture its products
and distribute them to retailers throughout Texas. The manufacturing facility will be in Austin
and will serve local Texas markets. Melanie will continue to make her own marshmallows, and
with the help of hiring a few select employees, she will be able to maintain the production rate to
stay consistent with the demand and protect her proprietary product recipes. Melanie is able to
creatively add additional flavors to her product line to easily expand her future product offerings.
She should continuously network by building secure relationships with external entities such as
retailers, distributors, and landlords to establish a more effective and efficient process of
developing, producing, marketing and selling the company’s products and services to consumers.
The strategy employed by Melanie’s Organic Marshmallows crafts her competitive advantage by
offering a product line of unique flavored marshmallows. Her flexible business model allows for
future expansion and quick adaptations to external forces.
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Situational Analysis
Strengths
With a starting capital of $400,000, she is able to produce 200,000 units of marshmallows.
Melanie can produce and sell these 200,000 units within 3 months. She offers a variety of 15
flavors, and she personally makes each of these by hand in an industrial sized kitchen. These
handcrafted marshmallows are differentiated from other mass produced marshmallows offered in
the market. Melanie’s Organic Marshmallows targets a specific consumer that is interested in
purchasing marshmallows that are both organic and gourmet.
Melanie has set aside a total of $200,000 to spend on advertising in 2012. For the
following years, Melanie’s advertising budget will be set as 15 percent of her total sales, which
will open the opportunity to create awareness about the product. Expansion into the online
marketplace will allow Melanie to explore digital marketing tactics as well. Product incentives
are also an option available for Melanie’s Organic Marshmallows, such as free samples offered
at local retail stores. These sorts of product incentives can increase top of mind awareness for the
product.
Melanie’s Organic Marshmallows sells successfully at Whole Foods, Central Market, and
specialty stores in the four major metropolitan areas of Texas. Her product is well received both
by children and adults. Melanie’s initial success will benefit her marketing efforts and possible
product expansion.
Although Melanie had to invest $200,000 of her own money, Melanie owns 60 percent of
her business making her the majority stakeholder. It is a key strength that her two best friends
each made an initial investment of $100,000 as well. At the end of each year, the two
stakeholders will each receive their share of 20 percent of the profit. The friendly relationship
with her stakeholders allows Melanie to maintain control of her business, but have an emotional
and financial support system.
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Table 1
Business Investment
Melanie's Investment $200,000.00
Friend1 Investment $100,000.00
Friend 2 Investment $100,000.00
Starting Capital Investment $400,000.00
Business Share Held by Friends 40.00%
Business Share Held by Melanie 60.00%
Weaknesses
As a startup company, Melanie must first establish brand awareness by investing in a strong
marketing plan in order to gain and retain consumers. Her organic marshmallows are competing
with brands that have already established themselves in the marketplace and have expanded their
product line of marshmallows. While this may be a future opportunity for Melanie’s company, it
is not financially feasible in the first few years while she is establishing her business operations.
Financially looking ahead, she must consider the amount of money she is spending to
lease an industrial size kitchen. Melanie spends $30 an hour to lease the kitchen, which may not
be a logical long-term expense. With a projected market growth of 30 percent per year, Melanie
is required to increase the amount of marshmallows she produces. To keep up with the market
demand, Melanie and her assistant are required to work full time with minimum days off.
Melanie does add additional employees each year, but over time she should consider a more
logical staffing system.
Opportunities
Melanie’s marketing consultant estimated the total demand for products like Melanie’s to be at
least $100,000,000 per year (at retail prices). This is projected to grow by 30 percent per year,
which allows for Melanie to increase her unit sales annually. Although there is a small selection
of marshmallow brands in Texas, the majority of her closest competitors are not sold in this state.
Another major opportunity Melanie is embarking on is the online expansion of her business.
Initially she introduces her website as a non e-commerce site to serve as a directory for
consumers. After the first year, Melanie expands to an e-commerce website in hopes of selling
10 percent of her products online. The e-commerce website will make Melanie’s Organic
Marshmallows available to other markets and consumers beyond the state of Texas.
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Additionally, this will give consumers and retailers the ability to contact Melanie for large orders
and gifts, both of which could prove to be very profitable. After the first three years of business,
Melanie should consider product line expansion, particularly to remain competitive in the online
market.
Threats
While expansion to the Internet is an opportunity, it may come with some disadvantages. Since
marshmallows are not commonly purchased online and predominantly bought in large orders via
the web, investing time and capital in the website could ultimately hurt Melanie’s business
transactions. Also, two investors financed the startup of Melanie’s company in exchange for 20
percent each of the company’s annual profits. While this was necessary to being her company, it
will account for a large portion of the business’s profit.
Her marshmallow sales have been very successful, but at this point it is unknown whether
the other “marshmallow-type” products will be successful such as cookies and Rice Krispies.
Investing capital into product expansion could be successful or threaten the business’s sales.
Additionally, Melanie cannot fulfill orders timely and must hire employees to keep up with
demand of her profit.
Industry Analysis & Trends
The total market for gourmet treats and candy in the State of Texas is approximately $20 billion
per year. At the end of 2005, gourmet marshmallows only accounted for 0.04 percent of that
market. The demand for the organic treats, particularly organic marshmallows was projected to
increase 30 percent every year. A marketing consultant projected that in 2012 the sales of this
type of product would be at least $100 million per year at retail prices.
According to ACNielsen, several years of innovation between the years of 2006 and July
2009 caused the $132 million marshmallow market industry to increase by 6.7 percent (Horovitz,
2009). Additionally, market research done by Information Resources Inc. showed that retail
marshmallow sales (excluding Walmart) totaled $146 million in 2008, which was up from $141
million the year before (Marshmallows Going Gourmet, 2009).
Companies are reinventing marshmallows for innovative uses beyond toppings for hot
chocolate or as an ingredient of s'mores. “Consumers have started to snack on marshmallows,”
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says Kraft’s director of marketing for Jet-Puffed (Horovitz, 2009). Smaller packets of flavored
marshmallows are now being sold by Jet-Puffed, Plush Puff and others. Many of these brands are
touting terms like “natural,” “artisan,” “gourmet,” “handmade” and “organic” on their labels to
further appeal to the gourmet and organic customers’ wants and needs.
The $18.9 billion Natural and Organic Food and Beverage Market (NOFB) is growing
and expanding its reach to the large market of health conscious consumers. One concern for the
Natural and Organic Food and Beverage market is the confusion about what the terms “natural”
or “organic” truly mean and the trust that consumers have with what the label claims. “Organic”
is often thought to be more expensive than “natural,” so consumers tend to lean toward
purchasing “natural” products to remain as a NOFB user (Mintel NOFB, 2011). The numbers
and trends prove that there is a growing market for organic foods, and the demand in the
marshmallow market is continuing to grow which reflects positively on Melanie’s business. The
NOFB market considerations are important to the success of Melanie’s business as she is
entering the market with an “organic” product.
Competitive Analysis
Jet-Puffed Marshmallows
Jet-Puffed sells over 30 varieties of marshmallows perfect for baking, snacking, decorating,
s'mores, hot cocoa, rice cereal treats, and even crafts. Their products are sold in most major
grocery store chains. The average retail price for a 10 oz. bag of regular sized marshmallows is
$1.99.
Dandies Vegan Marshmallows
Dandies Vegan Marshmallows are natural and contain no gelatin, which makes them vegan
friendly. They are sold in 10 oz packages between $5.00 to $5.30, and are only available in a
regular size. Customers can purchase Dandies through approximately 15 different online retailers
or at upscale supermarket outlets such as Whole Foods all across the United States (including
Texas) and in Australia, Canada, and New Zealand.
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Elyon
Elyon marshmallows are a kosher product and are available in natural vanilla and fruit flavors.
They are sold in either 5 oz or 7 oz packages, in both regular and mini sizes. Retail selling prices
average $1.70 for a 5 oz package and $3.50 for 7 oz package. The product is available at six
online retailers and at farmers’ and kosher markets primarily in New Jersey, as well as about 14
other states, including Texas.
I Love Puffy Love
I Love Puffy Love marshmallows are a handmade gourmet product and are available for
purchase in bulk solely at the manufacturer’s website. The marshmallows come in a variety of
flavors including Lemon Sunshine, Almond Delight, Coconut Breeze, Mint Royal, Maple
Cinnamon Kiss, Vanilla Bean Dream, and Chocolate Banana Wish.
Jazzed -Up Marshmallows
Jazzed-Up Marshmallows are a gourmet dessert product and are available for purchase either at
the manufacturer's website, at four small locally owned retailers in Wisconsin, or seasonally at a
local farmer’s market. The marshmallows are packaged based on weight starting at 1/10th lb for
$2.50 to 1 lb for $15.00. Flavors include 16 varieties offered year-round, with four additional
seasonal flavors available during different holidays. Custom orders are also an option.
240SWEET
240SWEET is an artisan marshmallow product, with approximately 13 flavors currently
available; however, a total of 150 have been developed and distributed in the past. They are
available for purchase at 240SWEET’s studio, their website and at Indiana farmer’s markets and
the state fair. The product is packaged in either sets of three puffs at $6.25 a set or half-pound
bag of petite puffs at $10.00 a bag.
Plush Puff Gourmet Marshmallows
Plush Puff marshmallows are gourmet and all natural. They are available to purchase online at
Williams-Sonoma and Abe’s Market, the manufacturer's website, as well as a number of brick-
and-mortar retailers in 22 different states primarily in Arizona and California. Packages are sold
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in 1-2 lb bags in 1-inch cubes, with prices ranging from $12.99 to $23.99. There is also an “odds
and ends” option available at $8.99 for a 1 lb package. Less popular flavors are sold in 4 oz
packages ranging from $5.50 to $6.50. Currently a variety of 13 flavors are available with some
additional seasonal options.
Company Analysis
Melanie Hart started making gourmet marshmallows for fun and to give as presents to her family
and friends on special occasions. Through experimentation, she quickly developed over 15
different flavors. Melanie slowly began to take larger orders from friends to feature at parties or
give as gifts. Melanie saw a business opportunity and took 50 bags of creatively packaged
marshmallows to a farmer’s market. After she was successful in making a $130 profit off this
one-time sale, Melanie considered her options for beginning a business.
In 2012, Melanie sold her product to retailers for $3.00, and with a cost of $0.40 for each
unit, she makes a $2.60 profit per unit. With a total capital investment of $400,000, Melanie sold
her products to Whole Foods, Central Market and a few specialty gourmet markets in all four
metropolitan areas of Texas. At a selling rate of 200,000 units every three months, Melanie was
able to sell 800,000 units in 2012. As seen in Exhibit 1, Melanie was able to earn a profit of
approximately $1.3 million after costs and payout to investors.
Melanie’s Marshmallows, placed in supermarkets and specialty stores, face little direct
competition as they have created a new product category in Texas. Jet-Puffed, Dandies and
Elyon are all also available in Whole Foods Markets and Central Markets throughout the state;
however, these brands sell in larger quantities and none of which are organic. Jet-Puffed has
introduced other flavors, like strawberry, and has added snack-size packaging to their product
line, but they do not fit into the gourmet category and lack both natural and/or organic
ingredients. Elyon brands their product as the “kosher marshmallow,” while Dandies pushes the
gluten-free/vegan positioning. Neither of these two competitors offers any different flavors,
small packaging, and are not considered a gourmet treat.
The competitors within the gourmet/specialty marshmallow market include Plush Puff, I
Love Puffy Love, 240SWEET and Jazzed-Up Marshmallows. Melanie’s main competitive
advantage within this category is that none of these other brands are available in Texas. Her most
direct competitor, Plush Puff, is available on a national scale and online. 240SWEET is available
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in a few retail stores mostly in the northern part of the Midwest and online. I Love Puffy Love is
only available online, and Jazzed-Up Marshmallows has limited retailer presence. Additionally,
Melanie’s point of difference in this category is that none of the other brands are positioned as
organic (Plush Puff uses the term “all-natural”).
Since marshmallows are utilized in cooking and often times combined with other foods,
Melanie’s product offerings expand the possibilities of the traditional uses for marshmallows.
Flavor variety creates the opportunity for unique combinations and recipes. Additionally, the
packaging allows Melanie to position her product as a “snack size” gourmet treat.
Consumer Analysis
Primary research was conducted by using a convenience sampling through a questionnaire
distributed through Facebook and email. These initial responses gave insight into potential
consumer preferences for organic foods and gourmet marshmallows. In addition, secondary
research was analyzed for both the gourmet treat market and the Natural Organic Food and
Beverage market in order to assess which consumers are best to target for this product.
Primary Data
Demographics
A survey was conducted with 68 respondents. Of these respondents, 54 were female and 14 were
male. The average age of the respondents was 26 years old, and 78 percent were between 18 to
34 years old.
Marshmallow Preferences
Survey: “What are your preferences on various marshmallow flavors? Rank from 1 (most
preferred) to 6 (least preferred).” The choices were as follows: classic, chocolate, fruit (e.g.
lemon, strawberry, etc.), mint, caramel, and vanilla. The most preferred flavor was classic. The
flavors most preferred beyond classic ranked in this order: vanilla, chocolate and caramel. The
least preferred marshmallow flavors were fruit and mint. See Question 5 in the Appendix for the
full results.
Analysis: These survey answers are important to Melanie’s development of her flavor lines and
estimation of demand. Since classic was the most preferred flavor, Melanie needs to include this
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flavor in her marshmallow offerings. People seemed to prefer the flavors that they were familiar
with, and rank a low preference to uncommon marshmallow flavors (e.g. mint and fruit).
Melanie should do additional market research on consumer preferences, and she should increase
awareness about the variety of flavors she plans to offer.
Survey: The survey asked participants, “What are your favorite marshmallow treats? Rank from
1 (most preferred) to 6 (least preferred).” The order respondents listed from most preferred to
least was as follows: s’mores, Rice Krispie treats, in hot chocolate, marshmallow cookies, cereal,
and ice cream topping.
Analysis: The results of this survey will help Melanie in the future when she chooses to further
develop her product line. After she has established a significant enough stronghold with her
initial offering of the organic marshmallows, she will need to seriously consider developing and
manufacturing other similar offerings in order to develop her brand and satisfy customer
demand. Based on the results of this question, she might want to research the possibility of
releasing a s’more-related offering or recipe, since it was the most popular.
Survey: Respondents were asked, “What attributes of a marshmallow are important to you?
Check all that apply.” The respondents ranked the most important attributes as follows: taste
(91%), texture (65%), size (47%) and flavor (34%).
Analysis: Although Melanie focuses on unique flavors as her point of difference, she should
consider other attributes when crafting her marshmallows. Taste, which is relevant to flavor, is
the most important attribute by those surveyed. Melanie should consider this characteristic above
all else when creating her unique flavors and consider running some product taste tests before
releasing new developments.
Purchase Preferences
Survey: When asked how often respondents consumed marshmallows, 75% of the respondents
answered less than once a month. Respondents also answered never (16%) and 1-3 times a
month (7%). When respondents were asked how often they bought marshmallows, 76%
answered less than once a month and 18% answered never.
Analysis: Melanie’s Organic Marshmallows could capitalize on targeting consumers that buy
marshmallows less than once a month by offering a specialty product to increase their
consumption patterns. Additionally, Melanie’s Organic Marshmallows could appeal to
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consumers that do not typically eat marshmallows because her products are considered a
gourmet treat. These answers demonstrate that there is an opportunity for Melanie to create a
need and generate a market for specialty organic marshmallows through more awareness. If these
consumers purchase marshmallows this infrequently, then her brand could be positioned as the
specialty item to splurge on once per month.
Survey: Respondents were asked, “Whenever you buy marshmallows, who do you buy them
for? Check all that apply.” Responses included 50% buying for themselves, 42% for their family,
34% for their friends, 14% for their children, 7% for their partner and 16% don’t buy
marshmallows.
Analysis: The majority of the respondents bought marshmallows for themselves and for their
family. Melanie could use this information to target her advertising and create her brand
accordingly. She should appeal to people who want to buy themselves or their family an organic
gourmet treat that is different than the traditional marshmallow.
Survey: Respondents were asked, “Do you always buy the same brand of marshmallows?” The
answers were 46% yes, 39% no and 15% don’t buy marshmallows.
Analysis: Less than half of the respondents are loyal to a certain marshmallow brand. Melanie
has the opportunity to attract consumers that are not already brand loyal to create a consistent
customer base.
Survey: “What do you believe is a reasonable price range for a bag of 15 organic gourmet
marshmallows?” The results were as follows: 34% chose the retail price between $4.00 to $4.49,
30% chose $4.50 to $4.99, 15% chose $5.00 to $5.49, 2% chose $5.50 and above, and 20%
chose other. The “other” answers included 12 price point suggestions with the average price of
$2.62.
Analysis: The retail price points most of the respondents chose were between $4.00 to $4.99.
Melanie’s Organic Marshmallows are initially being sold at a retail price of $4.20 in 2012, and
the retail price is increased to $4.34 in 2013. As long as Melanie is able to keep the retail price
below $5.00, consumers seem to be willing to pay this amount for a bag of 15 marshmallows. To
ensure that consumers are willing to pay a higher price for these organic gourmet marshmallows,
Melanie needs to clearly demonstrate the value of purchasing her product over competitors.
Survey: “Where do you usually buy marshmallows? Check all that apply.” The results were as
follows: 82% supermarket chain (e.g. HEB, Kroger, Randalls), 10% upscale supermarket chain
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(e.g. Whole Foods, Central Market), 28% general retail store (e.g. Target, Walmart, Walgreens),
3% candy store, 1% online and 16% don’t buy marshmallows.
Analysis: The majority of respondents (82%) buy marshmallows at a supermarket chain.
Melanie plans to distribute her products primarily through supermarkets. If this is where
consumers are most likely to purchase the product, Melanie needs to invest in adequate retail
displays and packaging of her products.
Survey: “For what purposes do you think most people buy marshmallows? Check all that
apply.” The results were as follows: 78% camping/s’mores, 75% baking ingredient, 34% special
occasion, 31% impulse buy, 3% gift for another and 3% don’t know/hot chocolate.
Analysis: The large majority of respondents (75% or over) selected camping/s’mores or baking
ingredient as the primary purpose for most people buying marshmallows. We can infer that the
respondents projected themselves into the scenario and would choose what they would buy. If
most people use marshmallows for baking or s’mores, a more generic and traditional
marshmallow would probably be the top of mind product to use. Melanie’s Organic
Marshmallows would need to provide a flavor (such as chocolate to be used in a s’more) to
provide more utility for these purposes. Thirty one percent of respondents selected “special
occasion” as the purpose for most people buying marshmallows. Melanie should market her
products so that consumers would think of this brand for special occasions.
Survey: “Do you buy organic food?” The results were as follows: 64% said yes and 36% said
no.
Analysis: The majority of the respondents already purchase organic food. The motivations for
purchasing organic foods should be further researched, and specifically the organic gourmet treat
market. The benefits of purchasing organic marshmallows should be emphasized for Melanie’s
Organic Marshmallows.
Survey: “Would you consider buying organic marshmallows?” The results were as follows:
10% definitely will not, 56% probably will not, 23% probably will, 10% definitely will.
Analysis: Most consumers are undecided when considering buying organic marshmallows.
Since there remains a possibility that they will purchase organic marshmallows, it is important to
target the consumers in that category and emphasize the advantages of organic marshmallows
over non-organic marshmallows.
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Survey: “Why do you think most people buy organic food?” The results are as follows: 88%
health, 0% taste, 1% cost, 1% don’t know, and 9% other.
Analysis: The majority of respondents prefer organic food for its health benefits. Therefore,
Melanie should market her product so that the benefits of buying an organic marshmallow
outweigh the reasons for buying a marshmallow that is simply gourmet or non-organic. Since
health is a major concern when buying organic food, being upfront with the ingredients and
explaining the handmade production of the marshmallows would make the customers more
trusting of Melanie’s product.
Survey: “Would you be willing to pay more for organic marshmallows than non-organic
marshmallows?” The results are as follows: 40% of respondents answered yes and the majority
at 60% answered no.
Analysis: Consumers may not be informed about the benefits of organic marshmallows over
regular, non-organic marshmallows. Providing information describing these benefits could be
advantageous for gaining more customers at a higher price. If consumers understood why quality
ingredients are worth more, than they could be more inclined to spend more for the product.
(Note: These survey results were based on data from 68 respondents.)
Secondary Data
The consumer analysis for Melanie’s Organic Marshmallows is concerned with two different
types of consumers (1) people who enjoy marshmallows and are likely to buy a specialty
marshmallow as a gourmet treat (2) people who are concerned with purchasing “organic”
products for various health and nutrition concerns.
The Gourmet Treat Market
● Common Characteristics: Due to the price of Melanie’s Organic Marshmallows, a higher
disposable income is an important characteristic of a potential consumer (Moran, 2007).
Geographically, Melanie is concerned primarily with the residents of the four largest
cities in Texas, which includes Austin, Dallas, Houston and San Antonio.
● Basic Needs, Wants, and Preferences: Gourmet food consumers pride themselves in their
knowledge of food, ingredients, and nutrition. They also enjoy entertaining friends with
gourmet food and wine. Gourmet treat consumers consider themselves adventuresome
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while cooking and trying new foods. Younger consumers and those with higher incomes
are more likely to purchase gourmet foods from specialty food stores such as Whole
Foods and Central Market. Gender and living location does not have an effect on the
likelihood of purchasing at specialty food stores (Moran, 2007).
● Buying Habits and Preferences: Gourmet food consumers spent $17.5 billion on specialty
foods and drinks in 2005. This group buys more food at unconventional specialty food
stores than other food consumers. However, this group is also just as likely to shop at
mainstream grocery stores like most food consumers. The channels of purchasing
specialty gourmet foods are supermarkets (88%) and specialty food stores (49%). Of
specialty food buyers, more than one-fifth buy through delis (29%), natural food stores
(28%), coffee shops (26%), and bakeries (23%). The majority of gourmet shoppers will
spend more on high-quality ingredients (Moran, 2007).
● Consumption Patterns: Since gender and location do not affect the likelihood of buying
gourmet foods from specialty food stores, consumption patterns are predominantly
congruent across United States markets, Texas markets, and genders (Moran, 2007).
Organic Food and Nutrition Market
● Common Characteristics: Specialty organic food is predominantly purchased by the age
group of 25- to 34-year-olds with yearly household incomes of $50,000 to $75,000
(Mintel Specialty Foods Market, 2011). This demographic is commonly characterized as
new families with young children who are concerned with safe, natural foods for their
families. Of this group, the individuals under 35-years-old are the most likely to try new
and unusual foods that are natural, organic, and fair trade.
● Basic Needs, Wants, and Preferences: Organic consumers have three broad goals in mind
when purchasing natural foods (Mintel NOFB, 2011). These goals are health, their
children’s health, and quality taste. Large portions (83%) of organic shoppers are highly
concerned about health and the health of their children. While considering health, this
group wants organic products that are affordable, easy to prepare, and taste good.
According to research, the taste of organic foods is the most important factor for organic
consumers when considering purchasing a product (Mintel Specialty Foods Market,
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2011). Other important factors are quality of the product, recommendations from others,
as well as impulsiveness while shopping.
● Buying Habits and Preferences: According to a Mintel survey assessing the Natural
Organic Food and Beverage market, the top three rationale for buying natural and organic
products are for personal health reasons (63%), parents concerned about their children
eating well (52%) and because they are thought to be more nutritious (44%). The fourth
main reason for buying organic, as cited by 39 percent of consumers, was concern about
the environment (Mintel NOFB, 2011).
● Consumption Patterns: Household income is also another important indicator of organic
consumers’ preferences. The highest income group in this category is more concerned
about the environment and the process of organic food production than the lower income
groups. The lower income groups are concerned with personal health and energy levels.
Therefore according to the research by Mintel, the difference between the higher and
lower income groups can be marketed as such. Products targeted for the lower income
groups focus on health and energy and higher incomes will focus on food production and
the environment. For the higher income group, focusing on local ingredients for products
and fair trade is also important in production and marketing of organic products (Mintel
NOFB, 2011). Also, of the brands marketing “natural” ingredients, advocating personal
and family health yields the most profitable results. In addition, organic consumers spend
about one in three dollars on all-natural and organic products. This group of specialty
food consumers also purchase local ingredients and are five times more likely to buy
organic foods than non-specialty food consumers (Mintel Specialty Foods Market, 2011).
Overall, these markets overlap to reveal a common consumer of a younger adult (25-34
years old) that is concerned with healthier foods and has a higher disposable income.
Further in-depth research needs to assess the trends of these two markets and the
overlapping consumer preferences will yield Melanie’s potential consumer base. Melanie
has the best chance of success with her product if she targets the audience that fits into
both of these consumer groups.
19
Product Market Focus Market and Product Objectives
Product Placement
Melanie is distributing her product throughout the state of Texas in the four largest metropolitan
markets, which include Houston, Dallas, San Antonio and Austin. Additionally, she plans to
expand into the online market. Her product is currently available in Whole Foods, Central
Market and a couple of specialty retail stores throughout those cities. In 2013, she plans to sell
90 percent of her products through supermarkets and specialty stores and 10 percent via a newly
designed e-commerce website. In the larger grocery chains such as Whole Foods and Central
Market, Melanie believes it is in her best interest to locate her product near the larger bins of
natural candies and dark chocolate, which have a similar image as a “healthier” sweet snack. In
specialty stores, Melanie’s product will be positioned near the checkout. This will help to attract
new customers by capitalizing on impulse purchases in hopes of gaining brand loyalty.
Market Penetration
Melanie has two potential target audiences: the gourmet treat market and the NOFB market.
These two audiences have a certain overlap, which helps to make the product extremely
marketable. The overlap is younger adults (25- to 34-years-old) with a higher disposable income
who are concerned with healthier food for themselves and for their children. Since Melanie has
no direct competitors, she is entering the market as new product category. Melanie’s 15 percent
advertising budget will essentially be used to attract non-users in order to differentiate her
product from others. Melanie plans to gain market share by convincing consumers that her
marshmallows are superior to the alternative options.
Expanding Product Line
Melanie is considering the expansion of her marshmallow business to include cookies with
marshmallow filling and other candy and gourmet snacks that could be distributed through the
same retailers. This goal realistically will come to fruition in a longer-term plan once Melanie
has increased her revenue enough to invest money in research and development of these new
items. Melanie should continuously create new flavors to generate buzz about her products and
keep a creative edge on the competition.
20
Supply and Demand
Melanie needs to have a plan for accurately meeting the demand of her products in order to
maximize her sales. In 2012, Melanie hired a kitchen assistant. With an additional employee it
takes exactly three months to produce 200,000 units. Both Melanie and the kitchen assistant
work 50 hours weeks, with 2 weeks off a year (See Table 2). The goal is to have the supply of
inventory match the demand. Therefore, when the amount of units needed to be produced
increases so does her demand for employees. Her production in 2012 was 800,000 units, based
on the 200,000 units per three-month demand projection. To meet her goal of three percent of the
market in Texas, Melanie must increase her distribution by 70,000 units in 2013 requiring her to
add a third kitchen assistant (See Exhibit 2). As shown in table 2, this employee will serve as a
part-time kitchen assistant (approx. 420 hours per year) and as a website assistant (10 hours per
week). Looking forward to 2014, Melanie will need to increase her distribution by an additional
230,000 units (See Exhibit 3). Since it takes two people to make 200,000 units in three months, a
new kitchen assistant will work approximately 8 months to produce the additional 230,000 units
(See Table 2).
Table 2
Employee Cost 2012
Employee #1: Kitchen Assistant $25,000.00
Hours Per Week 50
Hourly Wage $10.00
Employee Cost 2013
Employee #3: Kitchen Assistant/Website Manager $9,200.00
Hourly Wage $10.00
Employee Cost 2014
Employee #4: Kitchen Assistant 2 $13,800.00
Hourly Wage $10.00 *Employee #1 works same amount as Melanie (2 weeks off a year) *Employee #3 works 420 hours in the kitchen over the year to make the 70,000 extra bags and another 10 hours a week managing the online orders *Employee #4 1380 hours in the kitchen over a year to compensate for the extra 230,000 bags sold
21
Through experimentation in the kitchen, Melanie discovered it took her 1.5 hours to
make 250 units. In order to make 200,000 units, Melanie is required to work 1,200 hours, which
is approximately 6 months assuming a 50-hour workweek. Assuming that there is no limit on the
number of employees working simultaneously in the kitchen, the rental cost remains constant.
The cost of renting the industrial kitchen is $30 per hour, which equals $72,000 a year. (See
Table 3) In the future, to reduce this cost Melanie should consider investing this money into a
kitchen of her own.
Table 3
Kitchen Rental Cost
Cost Per Hour $30.00
Hours Per (250) Units 1.5
Hours Per (200,000) Units 1200
Rental Cost Per 1200 Hours (6 Months) $36,000.00
Kitchen Rental Cost Per Year $72,000.00 *1200 hours = 6 months *It takes her 6 months to make 200,000 so she will only have to pay to rent the kitchen twice *Assuming Melanie and Employee #1 work 50 hours per week, side by side in the kitchen *Assuming the cost does not change when the amount of employees working in the kitchen changes *Each full time kitchen employee (Melanie & Kitchen Assistant #1 get two weeks off a year) Online Expansion
Initially in 2012, Melanie will create a non e-commerce website. This website will primarily
serve as directory for consumers to find her product and create brand awareness. In order to drive
traffic and create interest in her business, Melanie will create additional content for this website
including recipes and an organic food blog. The cost to create the website in 2012 will be $4,880.
This cost includes host and customer support fees, a subscription fee, as well as a website
template fee.
Beginning in 2013, Melanie will expand this website to include an e-commerce element.
She plans to sell 10% of her product through this medium. For 2013, that will account for
approximately 87,000 units. The costs associated with managing an online store will be
approximately $97,330 for 2013. This cost includes shipping costs, e-commerce platform
management costs, host and customer support fees, and the website template. For online
distribution, Melanie will sell her marshmallows directly to the customer at retail prices allowing
her to increase her gross margin per sale.
22
In 2014, Melanie adjusts her sales ratio to 80 percent in stores and 20 percent online to
meet the growing demand of customers outside of Texas. In Melanie's original experiment with
her business, she received a lot of demand for large orders of marshmallows for parties and
events. Online distribution would accommodate these bulk orders for consumers.
Table 4
Non E-Commerce Expansion Cost 2012
Host & Customer Support Fee per month $160.00
Host & Customer Subscription Fee Total $1,920.00
Website Template $2,800.00
Total $4,880.00 *Average cost for using a website such as Firespring for a website template and management tools
Table 5
E-Commerce Expansion Cost 2013
Online Retail Price $4.20
Units Sold Online 87000
Minimum Shipment Cost $5.15
Maximum Number of Shipments Per Year 17400
Shipping Total $89,610.00
E-commerce Management Per Month $250.00
E-commerce Management Per Year $3,000.00
Host & Customer Support Fee Per Month $160.00
Host & Customer Subscription Fee Total $1,920.00
Website Template $2,800.00
Total $97,330.00 *Shipping cost based off UPS refrigerated shipping rates *Assuming that there is a 5 unit minimum (5) 4.0 oz. bags = 20 oz *Assuming marketing for online is included in the 15% set aside for marketing *Average cost for using a website such as Firespring for a website template and management tools *Maximum number of shipments is based on assuming each consumer will buy the minimum number of units (5) *Online price remains at $4.20, while In-Store cost increase $4.34 *Units sold online is 10% of total units
23
Table 6
E-Commerce Expansion Cost 2014 Online Retail Price $4.20 Units Sold Online 220000 Minimum Shipment Cost $5.15 Maximum Number of Shipments Per Year 44000 Shipping Total $226,600.00 E-commerce Management Per Month $250.00 E-commerce Management Per Year $3,000.00 Host & Customer Support Fee Per Month $160.00 Host & Customer Subscription Fee Total $1,920.00 Website Template $2,800.00 Total Costs $234,320.00
Pricing Objectives
Melanie wants to sell a premium product at a lower cost than her competitors while maintaining
a positive brand image. Her pricing strategy is consistent with this goal with a retail price of
$4.20 in 2012, and an increase of just $0.14 in 2013. Melanie strives to lower her costs to keep
consistent with her competitive pricing. Melanie’s production costs are as low as $0.40 per bag
of marshmallows. Additionally, by acting as both the manufacturer and the wholesaler online,
she is able to increase her gross margin per sale. If she can continue to increase her online sales,
this will enable her to increase her annual profit.
Long Term Profitability Considerations
If the market continues at the current expansion rate, Melanie will have to consider hiring
additional employees in order to meet the demand of her product and maintain her market share
of three percent each year. In 2013, Melanie increases her manufacturer's selling price by $0.10
to gain a higher gross margin. Melanie may need to investigate other ways to reduce costs in
order to increase her gross margin rather than continuing to increase the cost per unit to the
retailer. As shown in Exhibit 3, Melanie increases the amount of units sold online to 20% of all
units due to her successful online expansion in 2013. In 2014, Melanie must produce 1,100,000
units of marshmallows to maintain her market share. If the market continues to grow by 30
percent a year, she will need to consider whether or not she can continue to keep up with
producing so many marshmallows. Even if she can continue supplying such a large quantity of
marshmallows, will there be enough demand in the market? Also, Melanie begins to make a
24
large profit online by selling directly to the consumer, however the cost of refrigerated shipping
is excessive. She should investigate alternative shipping options for her online merchandise to
reduce costs.
Target Market
Melanie’s target market covers both gourmet and organic food consumers. The target market
includes young individuals and families between the ages of 25 and 34. These young families are
concerned with their health and the health of their children. Their average yearly household
income is approximately $50,000 to $75,000. Since the target market is concerned with health,
organic marshmallow treats could potentially be well received. Our own research found that 88%
of people believe health is the most common reason for purchasing organic food. Melanie’s
Organic Marshmallows are gourmet, made with organic ingredients, and are a fun and creative
novelty considered to be a healthier dessert option.
Points of Difference
The points-of-difference of Melanie’s Organic Marshmallows are the unique traits of her product
as compared to her competition and the characteristics the consumers strongly associate with her
brand.
● Gourmet and Organic: Melanie’s marshmallows fit into a unique category because they
are both gourmet and organic. Many of her competitors fit into one of these categories
but none of them have both of these characteristics.
● Variety of Flavors: Thus far, Melanie has developed 15 different flavors of
marshmallows. Although Melanie faces competition in this regard online, within the
Texas market, few of her competitors sell any variety of flavors.
● Packaging: Melanie packages her marshmallows in smaller quantities (15 marshmallows
per bag) as compared to her competition in Texas. Melanie’s bags are presented in
creative, distinctive ways.
25
Positioning Statement
Melanie’s Organic Marshmallows is the brand of gourmet organic marshmallows for young
adults ages 25-34 and their families. It provides a unique product offering in a variety of flavors
because the market is in need of expansion to satisfy consumers’ needs for a healthier sweet
treat.
26
Marketing Program Product Strategy
Brand/Product Line
Melanie’s Organic Marshmallows retail at approximately $4.20 for a bag containing 15
marshmallows in a variety of 15 flavors which include: Classic, Vanilla, Chocolate, Coffee,
Salted Caramel Apple Pop, S’mores, Tiramisu, Strawberry, White Chocolate & Raspberry,
Cookies & Cream, Thin Mint Chocolate, Toasted Coconut, Bubble Gum Ball Machine, Peanut
Butter Crunch, and Seasonal (e.g. Pumpkin Spice).
Major Features & Benefits
The appeal of Melanie’s Organic Marshmallows lies in the organic ingredients and the texture
that is produced during the homemade process. Melanie handcrafts each of her marshmallows
with care and is sure to add premium ingredients and toppings to produce the highest quality
marshmallow.
Packaging/Design
Reflecting the marketing strategies implemented by Melanie, the packaging is modern and
inventive just like her marshmallow flavors. In order to stand out among the other gourmet-
packaged treats, Melanie will create eye catching, fresh designs that continue to build her brand
image. The packaging will also attempt to appeal to adults who are gourmet food lovers. The
packaging will vary depending on each flavor, incorporating color schemes and other points of
differentiation. The package for the classic marshmallow will have the standard black and white
logo with black stripes and embellished with a red ribbon and wax seal. Other flavors will vary
in color of stripes and ribbons. For example, Bubble Gum Ball Machine will have pink stripes
and a pink ribbon. Melanie will also create packaging themes to coordinate with each season.
During the winter holidays, flavors will have blue and white stripes with snowflakes and white
ribbons, and orange and brown stripes and ribbons with autumn leaves for the fall season.
In order to reassure her customers about the benefits of purchasing Melanie’s Organic
Marshmallows, each package will feature her personal story. This story will further explain her
careful baking process, the quality ingredients and the superb flavors in each marshmallow. The
packaging will also have the USDA stamp of approval required on all certified organic foods.
27
Front & Back of Package
Price Strategy
Overall Pricing Strategy
In 2012, Melanie will market her product to retailers for $3.00 per bag. With the 40 percent
retailer mark-up this will put the product cost to consumers at $4.20. In 2013, Melanie increases
her price to retailers to $3.10, making the retail price to consumers increase to $4.34. This
pricing strategy places Melanie’s Organic Marshmallows in the median price range within this
industry and allows her to maximize her profit per sale. As for online sales, Melanie will still be
charging the retail price to consumers but will gain an additional net profit because she is
functioning as both the wholesaler and retailer during this process.
Price Comparison to Competition
The retail prices of gourmet marshmallows range from $3.00 to $5.50 per unit, for an average
price of $4.00. The main competitors include 240SWEET which retails online at $6.25 for a pack
of 3, Plush Puff which retails for approximately $5.50-$6.50, I Love Puffy Love’s are only
available for bulk ordering, and lastly Jazzed Up Marshmallows who charge per pound starting
at 1/10 pound being $2.50. Melanie’s price between $4.20 and $4.34 for a bag of 15
marshmallows places her in an appealing price range as compared to her competition.
28
Distribution Strategy
After assessing competitor’s methods of distributing products to retailers, a refrigerated truck
appears to be a worthwhile investment. A refrigerated truck for sale in Austin costs $15,000 and
will be purchased under the agreement of a two year financing payment plan. The fixed cost per
month for this investment is approximately $625. Calculations were made to determine the
amount of miles Melanie will travel in order to deliver her product to all her distributors. A total
of 900 miles were estimated each month in order to personally deliver her products. With the
truck averaging 15 MPG, and assuming gas is on average $3.50 per gallon, gas will cost
approximately $210 per month. This estimate will cost Melanie $2,520 a year for delivery costs,
not including the employee she hired solely for delivery purposes. The other 10 percent of sales
will be accounted for by online purchases, which will be delivered by shipping methods.
Shipping cost is $1.50 for every four ounces, which is the approximate weight of one bag of
marshmallows.
Table 7
Shipping Cost
Refrigerated Truck $15,000.00
Gas Cost Per Month 210
Gas Cost Per Year $2,520.00
Monthly Payment (24 month financing) $625.00
Miles Per Gallon 15
Miles Per Month (to all Texas locations) 900
Gas Cost Per Gallon $3.50 *This accounts for all four metropolitan areas of Texas *24 month financing will be paid over two years beginning in 2012
In 2012, Melanie hired an employee solely for the purpose of delivery and shipping. As
you can see in Table 7, this employee is working one week per month (12 weeks out of the year).
Melanie plans to deliver her products to stores once a month to keep up with demand, prevent
back-order and ensure fresh products. During this week, the employee will work a total of 30
hours. Additionally, the employee will be receiving a $150 per diem each day they are required
to travel. This cost accounts for food and overnight hotel accommodations.
29
Table 8
Employee Cost 2012
Employee #2: Shipping/Delivery $12,600.00
Hours Per Week 30
Hourly Wage $10.00
Per Diem $750.00 *Employee #2 only works 12 weeks out of the year because we only deliver once a month *For Employee #2 per diem per week (5 days/$150 a day)
30
Financial Data and Projection Financial and Marketing Goals
Melanie’s financial goal is to secure three percent of the overall Texas gourmet marshmallow
market by 2013. The gourmet treats and candy market in the state of Texas is approximately $20
billion a year. Gourmet marshmallows were 0.04 percent of that market at the end of 2005. A
marketing consultant projected the gourmet marshmallow market would be approximately
$100,000,000 (at retail prices) in 2012. With a projected growth of about 30 percent per year, the
gourmet marshmallow market will be $130,000,000 (at retail prices) by 2013. Since this is at
retail prices, and retailer’s markup the price 40 percent, her market share is calculated by
removing that 40 percent markup. As seen in Exhibit 2, Melanie is trying to achieve 3 percent of
the $92.9 million market, which is approximately $2.8 million (See Exhibit 2). In order to
achieve this goal, Melanie increased her units sold by 70,000 in 2013. Additionally, she
increased her manufacturer’s price from $3.00 to $3.10.
In 2014, Melanie will continue selling her products at the same price as the previous year.
She will however have to increase the amount of units she is producing in order to keep up with
demand. With the additional employees that Melanie has hired this goal is achievable. As shown
in Exhibit 3, Melanie increased her yearly profits and continued to hold three percent of her
market share. As stated before, online sales did increase this year, which was an essential reason
behind her profit outcome.
Summary of Marketing Strategy
Melanie has a set advertising and promotion budget of 15 percent of her total sales. Under this
budgeting plan, Melanie is committed to increasing her marketing expenses as her sales increase.
Thus far, her marketing strategy relies primarily on word of mouth recommendations from her
frequent customers. Publicity about this new “marshmallow craze” in various news sources helps
to increase awareness about this new niche product offering. Stories about this new marshmallow
product have been featured in magazines, food blogs, newspapers and broadcast television.
Melanie hired a marketing consultant to better understand the potential market and plans to hire a
marketing and advertising agency that best fits her objectives to help her accomplish her goals.
Additionally, part of this marketing budget would be allocated to advertising her online
expansion.
31
Three Year Projected Unit Sales and Revenues
In order to achieve her goal, Melanie will need to make a variety of important investments and
expansions in 2012. The investment in a refrigerated truck to deliver her product throughout the
state will take her two years to pay off, but will be essential to meeting the demand of her
product. Melanie will be required to hire on a kitchen assistant and delivery assistant to maintain
her current rate of production. Her projected sales for 2012 will be 800,000 units, which is
consistent with the current demand of the industry (See Exhibit 1). By selling all 800,000 units at
$3.00 a piece, and with the initial investment of $400,000, Melanie was able to secure a revenue
of $2.8 million. Her cost of goods sold was $320,000, due to her incidental costs of $0.40 per
unit. Thus, her gross margin for the year was $2.5 million. After all expenses are accounted for
and her investors have been paid their share, Melanie brings in a successful first year profit of
about $1.2 million (See Exhibit 1).
Melanie’s projected sales for 2013 will be 870,000 units, which compensates for the 30
percent projected growth of the industry (See Exhibit 2). In order to secure the three percent,
Melanie must increase her selling price to retailers by $0.10. By selling all 870,000 units at $3.10
each, Melanie was able to secure revenue of $2.8 million. Her costs of goods sold will be
$348,000 thus giving her a gross margin of $2.5 million. After all expenses are accounted for and
her investors have been paid their share, Melanie brings in a successful profit of about $1
million. Her profit decreased this year, because she did not have the additional $400,000
investment. She also invested approximately $97,000 into creating an e-commerce website,
which she projects will provide her with a significant increase of profit in the upcoming years
(See Exhibit 2).
In 2014, her projected sales will be 1,100,000 units, which compensates for the 30
percent projected growth of the industry in 2013 (See Exhibit 3). Selling all units at $3.10 each,
Melanie will be able to secure revenue of $3.7 million. Her costs of goods sold will be $440,000
thus giving her a gross margin of $3.2 million. After all expenses are accounted for and her
investors have been paid their share, Melanie brings in a successful profit of about $1.4 million.
Her profit will increase this year due to the increase in demand online, as she plans to sell 20
percent of her product online compared to 10 percent last year (See Exhibit 3).
32
Evaluation and Control With consistent monthly sales and profits, Melanie will be in a great place to begin to expand her
product line beyond marshmallows and increase her distribution to exceed her sales goals. A
tactical marketing plan will need to be developed to further target her customers and maintain the
expansion of her business. Dependent on her success in the metropolitan markets that she enters,
Melanie will need to consider hiring additional employees and increasing distribution.
Additionally, she will need to investigate other distribution patterns if her units increase past the
current means of her ground shipping strategy. Concerns about warehousing and product quality
control will be additional issues and costs associated with expansion beyond the state of Texas.
33
Exhibit 1
Year 1: 2012 Revenue $2,800,000.00 Cost of Goods Sold (COGS) $320,000.00 Gross Margin $2,480,000.00 Costs Advertising Expense (last 6 months of 2012) $200,000.00 Employee Cost (2) $37,600.00 Website (Non e-commerce) $4,880.00 Gas Cost per year $2,520.00 Truck Payment (half of 24 month financing) $7,500.00 Kitchen Rental Cost $72,000.00 Total Costs $324,500.00 Profit $2,155,500.00 Investor Profit (40%) $862,200.00 Melanie's Profit (60%) $1,293,300.00 Gourmet Marshmallow Market in Texas Market Share (Retail) 2012 $100,000,000.00 Market Share 2012 $71,428,571.43 Revenue Breakdown for 2012 Total Units Sold 800,000. In Store Sales 800,000 Manufacturer Selling Price $3.00 In Store Revenue $2,400,000.00 Total Revenue 2014 $2,400,000.00
*$400,000 of the revenue comes from initial investment *Cost per every 200,000 units (bags) 4x a year (0.40 per bag) *200,000 unit demand every 3 months= 800,000 units a year
34
Exhibit 2
Year 2: 2013 Revenue $2,792,700.00 Cost of Goods Sold (COGS) $348,000.00 Gross Margin $2,444,700.00 Costs Advertising Expense (15%) $418,905.00 Employee Cost (3) $46,800.00 Website (E-commerce) $97,330.00 Gas Cost per year $2,520.00 Truck Payment (half of 24 month financing) $7,500.00 Kitchen Rental Cost $72,000.00 Total Cost $645,055.00 Profit $1,799,645.00 Investor Profit (40%) $719,858.00 Melanie's Profit (60%) $1,079,787.00 Gourmet Marshmallow Market in Texas Market Share (Retail) 2012 $130,000,000.00 Market Share 2012 $92,857,142.86 3.0% Goal $2,785,714.29 Melanie's Share 3.01% Revenue Breakdown For 2013 Total Units Sold 870000 In Store Sales (90% of sales) 783000 Online Sales (10% of sales) 87000 Manufacturer Selling Price 3.1 In Store Revenue $2,427,300.00 Online Sales Retail Price 4.2 Online Revenue $365,400.00 Total Revenue 2014 $2,792,700.00
*To keep up with demand, and reach her goal of 3%, Melanie has to increase her units sold by 70,000
35
Exhibit 3
Year 3: 2014 Revenue $3,652,000.00 Cost of Goods Sold (COGS) $440,000.00 Gross Margin $3,212,000.00 Costs Advertising Expense (15%) $547,800.00 Employee Cost (4) $60,600.00 Website (E-commerce) $235,090.00 Gas Cost per year $2,520.00 Kitchen Rental Cost $72,000.00 Total Cost $918,010.00 Profit $2,293,990.00 Investor Profit (40%) $917,596.00 Melanie's Profit (60%) $1,376,394.00 Gourmet Marshmallow Market in Texas Market Share (Retail) 2012 $169,000,000.00 Market Share 2012 $120,714,285.71 3.0% Goal $3,621,428.57 Melanie's Share 3.03% Revenue Breakdown For 2014 Total Units Sold 1100000 In Store Sales (80% of sales) 880000 Online Sales (20% of sales) 220000 Manufacturer Selling Price 3.1 In Store Revenue $2,728,000.00 Online Sales Retail Price 4.2 Online Revenue $924,000.00 Total Revenue 2014 $3,652,000.00
36
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37
Appendix
Last Modified: 04/19/2013
1. How often do you eat marshmallows?
# Answer Response %
1 Everyday 1 1%
2 Between 2-‐6 times a week
1 1%
3 Once a week 0 0%
4 1-‐3 times a month
5 6%
5 Less than once a month
58 74%
6 Never 13 17% Total 78 100%
2. Whenever you buy marshmallows, who do you buy them for? Check all that apply.
# Answer Response %
1 Yourself 38 49% 2 Your family 33 42% 3 Your friends 26 33% 4 Your children 11 14%
5 Your spouse/partner
5 6%
6 I don't buy marshmallows
12 15%
7 Other 4 5% Other
Cook out For more 5 goldfish smores My students
38
3. How often do you buy marshmallows?
# Answer Response %
1 Everyday 0 0%
2 Between 2-‐6 times a week
2 3%
3 Once a week 0 0%
4 1-‐3 times a month
2 3%
5 Less than once a month
57 77%
6 Never 13 18% Total 74 100%
4. Do you always buy the same brand of marshmallows?
# Answer Response %
1 Yes 28 45% 2 No 25 40%
4 I don't buy marshmallows
9 15%
Total 62 100%
39
5. What are your preferences on various marshmallow flavors? Rank from 1 (most preferred) to 6 (least preferred).
# Answer 1 2 3 4 5 6 Total Responses
1 Classic 61 2 1 1 0 2 67 2 Chocolate 2 22 13 14 9 5 65
3
Fruit (e.g. lemon, strawberry, etc.)
2 4 12 6 14 28 66
4 Mint 1 2 9 10 17 25 64 5 Caramel 1 5 13 21 17 8 65 6 Vanilla 1 30 17 11 4 2 65 Total 68 65 65 63 61 70 -‐
6. What are your favorite marshmallow treats? Rank from 1 (most preferred) to 6 (least preferred).
# Answer 1 2 3 4 5 6 Total Responses
1 S'mores 35 12 14 4 3 0 68
2 Marshmallow Cookies (e.g. Moon Pies)
1 8 13 16 14 13 65
3 Cereal (e.g. Lucky Charms)
3 6 9 12 21 13 64
4 In Hot Chocolate 7 25 14 13 6 2 67
5 Rice Krispie Treats 22 16 11 11 6 1 67
6 Ice Cream Topping 2 4 5 6 17 31 65
Total 70 71 66 62 67 60 -‐
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7. What attributes of a marshmallow are important to you? Check all that apply.
# Answer Response %
1 Taste 63 91%
2 Flavor (e.g. Vanilla, Chocolate, etc.)
23 33%
3 Texture 45 65%
4 Size (e.g. mini, regular, jumbo)
32 46%
5 No artificial ingredients
12 17%
6 Gourmet / Artisan
2 3%
7 Organic 4 6% 8. What do you believe is a reasonable price range for a bag of 15 organic gourmet marshmallows?
# Answer Response %
1 $4.00 to $4.49 22 35% 2 $4.50 to $4.99 18 29% 3 $5.00 to $5.49 9 15%
4 $5.50 and above
1 2%
6 Other 12 19% Total 62 100%
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Other
I would not pay more than 3.00 for any marshmallows 2.00 under $4-‐ there are so few! $2.00 $1.50 $2-‐3 3.00 3.49 $3 3.50 2.00 $1.50
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9. Where do you usually buy marshmallows? Check all that apply.
# Answer Response %
1
Supermarket chain (e.g. HEB, Kroger, Randalls)
57 83%
2
Upscale supermarket chain (e.g. Whole Foods, Central Market)
7 10%
3
General retail store (e.g. Target, Walmart, Walgreens)
19 28%
4 Candy store 2 3%
5 Specialty gift store
0 0%
6 Online 1 1%
7 I don't buy marshmallows
11 16%
8 Other 2 3% Other
Costco Costco
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10. For what purposes do you think most people buy marshmallows? Check all that apply.
# Answer Response %
1 Special occasion
23 33%
2 Impulse buy 21 30%
3 Baking ingredient
51 74%
4 Snacking 15 22%
5 Gift for another
2 3%
6 Camping / S'mores
54 78%
7 Other 2 3% Other
I don't know hot chocolate 11. Do you buy organic food?
# Answer Response %
1 Yes 43 64% 2 No 24 36% Total 67 100%
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12. Would you consider buying organic marshmallows?
# Answer Response %
1 Definitely will not
5 10%
2 Probably will not
27 56%
4 Probably will 11 23% 5 Definitely will 5 10% Total 48 100%
13. Why do you think most people buy organic food?
# Answer Response %
1 health 61 88% 2 taste 0 0% 3 cost 1 1% 4 don't know 1 1% 5 other 6 9% Total 69 100%
other
stigma ( most people hear that it is better for you but do not do research on their own. they have more money than they know what to do with environment/pesticides environment to brag about it think it's better than non organic
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14. Would you be willing to pay more for organic marshmallows than non-‐organic marshmallows?
# Answer Response %
1 Yes 22 41% 2 No 32 59% Total 54 100%
15. What is your gender?
# Answer Response %
1 Male 15 22% 2 Female 54 78% Total 69 100%
16. How old are you?
# Answer Response %
1 Under 13 0 0% 2 13-‐17 0 0% 3 18-‐25 37 54% 4 26-‐34 16 23% 5 35-‐54 7 10% 6 55-‐64 7 10% 7 65 or over 2 3% Total 69 100%
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17. What is your annual household income in U.S. dollars?
# Answer Response %
1 Less than $25,000
23 33%
2 $25,001 -‐ $50,000
16 23%
3 $50,001 -‐ $75,000
8 12%
4 $75,001 -‐ $100,000
7 10%
5 Over $100,000 15 22% Total 69 100%
