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.Specifically, you will address:

1. Market Potential & Sales Goals (Stats)
2. Break Even and Pricing Analysis (Accounting)
3. Marketing Budget and Performance Metrics (Finance)
4. Market Assessment & Recommendations (Marketing, Integration)

Related Course Materials & Help

1. Marketing by the Numbers Book Chapter and Recorded Lecture
2. Marketing by the Numbers Equation Sheet
3. Beverage Drinking Occasions - Information on the trends in Alcohol Consumption: Alcoholic

Directions: Use the resources provided to help answer the following questions and fill in the worksheet. You may upload your work as a second document - please make sure it is legible.

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 and low and high rang estimate of the market in units.

• HomeBar is a one time, one per household purchase
• The system is (currently) used for only for alcoholic drinks there are approximately 200 million households with adults from 22-75 in the US.
• HomeBar research indicates that and 60% of these households possess the discretionary income needed to purchase this machine.
• Results of a Mintel market report that 85% of US adults (22+) drink Alcohol.
• Of those surveyed 30% of drinkers report consuming alcohol at home and
• 66% of those drinking at home reported that they drink cocktails

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

2. Sales Goals

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. Using the wholesale price, how many machines need to be sold in year 1 to meet these sales goals?

2.______________________________________________________________________machines sold

Part 2: Break Even and Pricing Analysis

3. Break-Even Analysis - Accounting

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?

3. Current break-even volume: _____________________________________________________________________

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.

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 - finance

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 wholesales sales, just shy of the $30,000,000 sales goal. The Cost of Goods Sold was $16,343,232. Using value 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: ________________________________________________

Part 4: Market Assessment & Recommendations

After the first year of sales did not meet projections, the CMO would like you to use the data, findings, and trends in the 'Alcoholic Beverage Occasions' report (health, sober-curious) to:

• Assess the industry using the SWOT table below
• Think about ways to add value to the HomeBar machine by offering value-adds and extending the POD product line in order to reach a broader customer segment and help overcome the high initial price point.

6A. SWOT Analysis of the Alcohol Industry

Strengths

Weaknesses

1.

2.

3.

1.

2.

3.

Opportunities

Threats

1.

2.

3.

1.

2.

3.

6B. Top recommendation to HomeBar to increase sales potential: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________