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Zoecon Corporation Case

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To: Executive, Zoecon Corporation

From:

Date: Thursday, February 17, 2005

Subject: Strike Roach Ender Introduction

Projected Industry

Consumers Professional

Projected Growth Rate of 10% annually Projected growth rate of 8% annually

Projected sales of $4.4 million Projected sales of $2.7 billion

Flea IGR Introduction - Similar Scenario

* Great success of introduction of flea IGR PRECOR into PCO, veterinary and pet store markets.

* In 1980 Zoecon broke into the supermarket segment by selling the PRECOR ingredient to it's competitor dCon

* In early 1983 Flea Ender (using PRECOR) was introduced to supermarkets by Zoecon - 11 % of the market was captured by late 1983

* Flea Ender's success attributed to a second 3rd party competitor S.C. Johnson

* By 1985 Strike Flea Ender had captured 18% of the flea pesticide market and continues to achieve it's profit objective

Consumer Test Market Analysis

Zoecon's introduction of the Strike Roach Ender has captured a substantial portion of the test area household market segment. As seen in Table A the brand was recognized by over half of the households in the market and 6 %,( 70,200 households) of those households purchased the brand, resulting in a profit of $ 247,180.40. Though repeat purchases were also high at 30% (21,060 households) the profit generated was not enough to sustain a revenue in the trial market. Zoecon ended the market in a net loss of $$1,230,819.40. Figures are further broken down in Table A.

Contribution margins were also high for Strike Roach Ender. Aerosol Strike had a contribution margin of 55.1% and fogger had an even higher margin of 57% as seen in Table B.

Table C projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table C substantially larger sales are required to break even.

Industry Market Analysis

Using the techniques from the test market estimates of market share and projected sales for the 19 city (80% of trial insecticide volume) are made for the introduction of Strike Roach Ender into the household market. I also chose to increase the advertising budget by 20% which increased costs to upwards of $12 million. This further drove the net loss to a final projection of $6,844,476 as seen in Table D.

Much like the test market Contribution margins were also high for Strike Roach Ender. Aerosol and fogger Strike had a contribution margin exceeding 50% as seen in Table E.

Table F projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table F substantially larger sales are required to break even. Therefore more profitable alternatives and options must be sought to compliment or replace 19 city introduction.

Options

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