Twinkies- Primary product

Suggested Retail Price Company	$ 2.99
Mark Up	50%
Selling Price to the distributor/merchandiser	$ 1.99
Suggested Retail Price to the company	$ 1.99
Less: Cost of twinkie 69.03%	$ 1.37
Gross Margin 30.97%	$ 0.62

Pop tarts- Competitor product

Suggested Retail Price Company	$2.00
Mark Up	50%
Selling Price to the distributor/merchandiser	$ 1.33
Suggested Retail Price to the company	$ 1.33
Less: Cost of twinkie 64.02%	$ 0.85
Gross Margin 35.98%	$ 0.48

1. Comment on the differences in cost between the two competitors, and assert the reason for this difference (e.g., does the company compete on cost or differentiation?)

2. Apply the concept of the value chain to this product. What types of costs would be relevant for each segment of the value chain for this product?

3. Research a single critical ingredient of your snack and its source. Do you expect significant increases in the cost of this ingredient over the next year? Support your response with input from the commodities market or other economic data.