Posted: November 24th, 2014

profit projection Kitto Kids Kit Kat Krunch

profit projection

Kitto Kids Kit Kat Krunch
Profit Projection Outline
Group Leader: Colby Cox
By: Colby Cox
1.    Price per unit of product
a.    Price of competitors per oz. (retrieved from Walmart.com)
i.    Reese’s Puffs: $0.25
ii.    Cinnamon Toast Crunch: $0.23
iii.    Lucky Charms: $0.23
iv.    Apple Jacks: $0.23
v.    Cocoa Pebbles: $0.24
b.    Price of Kit Kat Krunch in different box sizes
i.    Price of 10 oz. box: $2.50
ii.    Price of 13 oz. box: $3.12
iii.    Price of 20 oz. box: $4.75
c.    Supporting price decision
i.    Median of competitors’ pricing
ii.    Offers best deal on largest product size
iii.    Makes most profit on smallest product size
iv.    Not the cheapest among competitors to show there is not a quality decrease
v.    Wal-Mart’s services were used because that is where the product will be distributed
2.    Demand for product
a.    Estimated share of market
i.    Kellogg’s, General Mills, and Post make up 73% (Andrews, 2014)
ii.    Striving to gain 10% of the remaining market, Kit Kat Krunch would have 2.7% of the cereal market
b.    Projected demand for product during first year of sales
i.    Approximately 2.7 billion boxes of cereal are sold annually (Andrews, 2014)
ii.    Correlating 2.7 billion boxes sold with a 2.7% share of the market, 72,900,000 is the estimated number of boxes sold within the first year of sales
c.    Yearly increase in demand with implemented marketing plan
i.    With successful promotions, Kellogg’s demand increased by 2.5% in 2013 (retrieved from Kellogg’s 2013 Annual Report)
ii.    General Mills’ increased their demand by 3% in 2012 with effective commercializing (retrieved from General Mills 2012 Annual Report)
iii.    Aiming for results similar to Kellogg’s and General Mills, our projected increase in demand is 2.25% annually over a 5-year period during the implementation of the marketing plan
3.    Cost of 5-year marketing plan
a.    First and second year
i.    Nickelodeon commercializing, two every Saturday morning
1.    $70,000 per commercial spot, therefore approximately $7,280,000 annually (Mifflin, 1997)
2.    Attempt to reach children first
ii.    Full-page advertisement in Sport Illustrated Magazine, once a month
1.    Approximately $194,350 for single full-page ad, therefore $2,332,200 as a yearly rough estimate (retrieved from http://www.gaebler.com/Sports+Illustrated-magazine-advertising-costs++31059)
2.    Allows a wide spectrum of readers, including teenagers which remains consistent with our target market
b.    Third and fourth year
i.    Continue with Nickelodeon and Sports Illustrated advertising
1.    To reinforce need for product
2.    Allows for an efficient medium to communicate to target market, therefore it is a constant means of advertising
ii.    Cartoon Network commercializing, two every Saturday morning
1.    $65,000 per commercial spot, therefore approximately $6,760,000 annually (Mifflin, 1997)
2.    Reaches a slightly older audience than Nickelodeon
c.    Fifth year
i.    Continue with Sports Illustrated advertising
ii.    Increase to three Saturday morning commercials on  Nickelodeon and Cartoon Network
1.    Approximately $21,060,000 combined
2.    Repeated use over a short time period greatens strength of advertisement
4.    Profit Projection over 5-year period excluding manufacturing costs
a.    First year
1.    Revenue: 72,900,000 * $3.12 = $227,448,000
2.    Cost of marketing: 7,280,000 + 2,332,200 = $9,612,200
3.    Projected profit: $217,835,800
b.    Second year
1.    Estimated demand increase: 72,900,000 * .0225 = 1,640,250
2.    Revenue: 74,540,250 * $3.12 = $232,565,580
3.    Cost of marketing: 7,280,000 + 2,332,200 = $9,612,200
4.    Projected profit: $222,935,380
c.    Third year
1.    Estimated demand increase: 74,540,250 * .0225 = 1,677,156
2.    Revenue: 76,217,406 * $3.12 = $237,798,307
3.    Cost of marketing: 7,280,000 + 2,332,200 + 6,760,000 = $16,372,200
4.    Projected profit: $221,426,107
d.    Fourth year
1.    Estimated demand increase: 76,217,406 * .0225 = 1,714,892
2.    Revenue: 77,932,298 * $3.12 = $243,148,770
3.    Cost of marketing: 7,280,000 + 2,332,200 + 6,760,000 = $16,372,200
4.    Projected profit: $226,776,570
e.    Fifth year
1.    Estimated demand increase: 77,932,298 * .0225 = 1,753,477
2.    Revenue: 79,685,775 * $3.12 = $248,619,618
3.    Cost of marketing: 21,060,000 + 2,332,200 = $23,392,200
4.    Projected profit: $225,227,418
References
Andrews, Ryan. 2014. All About Breakfast Cereals. Retrieved from http://www.precisionnutrition.com/all-about-breakfast-cereals
Mifflin, Lawrie. 1997. Nickelodeon, the children’s cable network, wins viewers, but loses out on ad rates. The New York Times.
General Mills 2012 Annual Report. 2013. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=74271&p=irol-irhome
Kellogg’s 2013 Annual Report. 2014. Retrieved form http://investor.kelloggs.com/investor-relations/annual-reports/default.aspx
Sports Illustrated – Magazine Advertising Costs. 2014. Sports Illustrated Online. Retrieved from http://www.gaebler.com/Sports+Illustrated-magazine-advertising-costs++31059
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