Assignment Overview You attend a business networking event and meet the new marketing director for HomeBar a product that creates bar quality cocktails, brews and more at the push of a button. It uses POD similar to a Keurig coffee maker. As your colleague prepares the marketing plan for this project they have a few questions regarding the Financials and your recommendations for this product.

Part 1: Market Potential and Sales Goals

1. Market Potential Assess the potential market for the HomeBar system, using the following US population data and statistics on alcohol consumption in the US. Provide a low and high range estimate of the market in units.

Alcoholic Beverage consumption is increasing 4% 2018 through 2021. This growth is higher than the 3% average of the last 10 years. In the past 18 months consumption is up 9% from 2019. But only 2% the last 6 months.

The export market for US based products is growing substantially. Domestically, there is higher rates of consumption in the South and Northwest.

Consumption among men is slowing and women are now almost equal in consumption.

HomeBar is an international brand rated among the most trusted brands in the industry. The innovation native of the company is seeing new product launches every quarter. Customer loyalty is high and the company is seen as a leading company in sustainability. Costs are running higher than industry average and profit margins are the highest in the industry. There is conflict in the distribution channels due to direct, indirect, wholesaling and retailing are controlled by the company. The distribution network is also limited due to the company exercising too much power.

As of 2020 there are approximately 200 million adults from 22-75 in the US and 60% of US Households earn more than $50,000 per year.

According to the Alcoholic Beverage Occasions report 85% of US adults (22+) drink Alcohol, with an average of 30% of drinkers consuming alcohol at home and 66% reporting they are cocktail drinkers.

1. The Market potential range for this product in the US is:

The CMO has set a total sales goal of $30 million for the HomeBar in year one. While the machine will retail for $399, the wholesale price of the machine is $300.

2a. Using wholesale price, how many machines must be sold in year 1 to meet the sales goals?

2b. What is the market potential retail sales based on your range in #1.

Part 2: Break Even and Pricing Analysis 3. Break-Even Analysis The CMO would like to know how many machines must be sold to break-even, this will represent the lower end of their sales goal.

The variable cost per machine is $78

The fixed costs to manufacture the machines is $9,000,000 At the current wholesale price of $300 per machine, what is the break-even volume for the machines?

3a. Current break-even volume:

3b. What is the contribution margin (in percentage terms)

3c. If total profit last year was $1,000,000 how many units were sold?

3d. Price is increased by 20% next year. What is the new unit contribution?

3e. Given this price increase, how many units will need to be sold to make the same $1,000,000 profit?

4. Pricing Analysis

HomeBar thinks the largest hurdle to purchase is the initial price of the machine and would like to know if they should lower the price of the machine to entice more people to buy it, which should increase the number of refill pods and ancillary products sold over time.

4.A. Using the number of machines necessary to meet the sales goal you calculated in question 2 as the unit sales, calculate a break-even, wholesale price for the machines - rounded to the nearest dollar.

4A. Break-even wholesale price: $

4.B. Using the break-even cost to wholesalers calculated in 4.A, calculate the new break-even volume

4.B.New break-even volume:

4.C. Based on your calculations in 4A and 4B is it feasible to reduce the cost of the machines to the break-even number? Support your answer. 4.C.

4D. Using the wholesale break-even price calculated in 4.A. determine a new wholesaler price for the machine based on a HomeBar earning a 25% markup. 4

4D. New wholesale price:$

4E. The manufacturer suggested retail price for the machine needs to allow wholesalers to enjoy a 25% mark-up as well. Using the mark-up price calculated in 4D. what should the new suggested retail price be (you can round your figure to the nearest 10 dollars to make a more appealing price:

4.E. New MSRP:$

Part 3: Marketing Budget and Performance Metrics

5. Marketing Performance Metrics

The CFO was willing to provide a total marketing budget of $7,000,000. One year after the official launch of the HomeBar, at the retail price of $399 and wholesale price of $300, they realized $28,243,200 in net wholesale sales, just shy of the $30,000,000 sales goal. Using values from previous questions, provide the following calculations:

5.A. The Net Marketing Contribution is:

5.B. The Marketing Return on Sales is:

5.C. The Marketing Return on Investment is: