Jabu, a brand manager in a South African confectionery manufacturer, reviews his product profitability sheets. His energy sweets are making an overall loss, but he needs to know whether this is true for both his customer groups: supermarkets and independent corner shops. He sells in bulk to supermarkets, who negotiate large discounts and expect delivery to their central warehouse. Sales to small independent owners of corner shops are time-consuming, but he can charge them full price. The average cost of visiting a customer is 6,000 rand.

REQUIRED:

Using the information in Table 16.7, calculate the profitability of the energy sweets by distribution channel, and advise Jabu on what he should do.

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Table 16.7 Jabu customer profitability data Supermarkets Corner shops supplied Number of boxes of energy sweets List price per box Discount Manufacturing cost per box 1,200 700 270 rand 270 rand 30% none 108 rand 108 rand In-store promotion cost Customer visits per year Bad debts 40,000 rand nil 3 12 nil 5% of sales value Number of deliveries per annum Average distance per delivery 100 240 250 km 150 km Delivery cost per km 1.25 rand 1.25 rand