Quincy Tosfuerte sat at his desk, working furiously on his business plan for his

start$-$up company, Tosfuerte Cigars, LLC$.$ He would start off with a line of about

five different Dominican cigars grown from Cuban seed, smuggled out of Cuba

by unrepentant capitalists after the Rise of Fidel. Quincy$$s plan was to enter in

the mid$-$price range and expand from there once he established his brand in the

marketplace.

Quincy had a slew of data in front of him and he needed to make sense of it

before he approached his potential investors. he would need to provide the

investors with the following market information:

$(1)$ Total Mid$-$Range Cigar market size. $(2)$ Probable Annual $ Sales for Smoky

Mountain $(3).$ Required Break even market share. Although prices and costs

varied somewhat by different cigar types he would produce, he figured on a

mid$-$range average of $$20$ per cigar at retail. The product would be sold

exclusively in cigar specialty shops. These shops control approximately $50\%$ of

the $$better$$ cigar market. Typical retail margins are $30\%.$ He faced the

following costs:

Cost of Goods Sold $($per unit$)30\%$

Salaried $($non$-$sales$)$ employees $ $1,500,000$

Manufacturing Overhead $ $1,00,000$

Overhead and Admin $ $500,000$

Packaging $1\%$

Shipping $(2\%$ of revenue$)$

Advertising and PR fees $ $3,000,000$

Sales Force Salaries $ $1,000,000$

Sales commission $5\%$ of revenue

Although figures were somewhat $$hazy$,$ various reliable industry sources

indicated that current market shares broke out at follows:

Bad A Bing Cigar Company $25\%$

Mambo Combo Cigars $37\%$

Hackney & Coughlan Cigars $22\%$

All other $16\%$

The total adult male population is around $150$M$.$ Over $99\mathrm{.}9\%$ of cigar buyers are

males, according to Cigar Aficionado. Approximately $10\%$ of men smoke cigars

regularly. About $50\%$ of regular cigar smokers tend to buy their cigars in the

mid$-$price range at specialty shops as mentioned above. Total mid$-$price cigar

sales at Manufacturer$$s Prices came to $ $1\mathrm{.}5$B in $2018.$ Quincy estimates that he

can capture $5\%$ of the market in year one.

A recent representative survey showed this information about cigar

consumption frequency by mid$-$price buyers. In the survey, $50\%$ of cigar

smokers said they would be very interested in Tosfuerte Brand Cigars.

Survey #$1$: How many cigars to you typically smoke per week?

$($Total in Survey $=1,000)$ Survey

Results

Projected #

$\%$ Very interested in Quincy$$s Cigars $50\%$

Expected # of Cigars Per Week

$140\%$

$220\%$

$320\%$

$410\%$

$510\%$

Quincy got out his calculator and his notes. He needed to provide his investors

with the following information:

$$ Approximate size of the total market for the mid$-$priced sub$-$category

$$ Approximate annual sales his company might expect.

$$ Contribution per unit

$$ Required Break Even in dollars in Year $1$ of operation.