“Synergy” is the key operating word when it comes to acquisitions. As a brand manager,when you are e looking to extend the line, it’s very important to ensure that the brandyou are acquiring gives a synergy with your existing portfolio. Your company manufactures and markets toilet soaps. Your Organisation is known for itsgood distribution strength and has a strong presence in rural markets (in addition to anequally strong presence in urban markets). Your competitors have an equally gooddistribution in urban areas (towns and cities) and hence give a strong fight in theseareas. However, you clearly dominate them in rural areas because of the strength of your distribution channel vis-à-vis theirs. In addition, the company takes great pains in “building brands” as they feel that this is the best long-term option as opposed to short-term spurts in growth by artificial means.The company has made a policy decision to enter into the market for detergentsbecause of the obvious distribution synergy it offers. In addition, the market size of detergents is large (20 lakh tonnes valued at approximately Rs. 1300 crores). As a BrandManager in charge of a toilet soap, you have been asked by your Group ProductManager to evaluate some brands of detergents that your Organisation is planning toacquire. Exhibit 1 gives the market shares enjoyed by the various brands of detergents(
). Exhibit 2 gives the consumer prices of the brands. Exhibit 3 gives the trialrates induced by the brands and is given as the number of consumers who have triedthe brand in the past. Exhibits 4 and 5 give the break up of sales for each brand overdifferent income categories and town categories respectively. Exhibit 6 gives the marginsgiven to retailers for different brands. The brands that are available for acquisition aregiven in
and are underlined. You may assume that all detergents are sold in thesame size. Your assignment:
Draw up criteria to evaluate the alternate brands available for acquisition. (08Points).
Evaluate these brands across the above criteria and suggest the brand(s) to beacquired. (12 Points).
Estimate the segment sizes (by weight) of the different income categories AND thesegment sizes (by weight) of villages, towns and cities. From this data, whatinferences can you draw about the key tasks at hand after acquiring the brand(s) of detergent(s)? (20 Points).
If the Net Profit Margin (after tax) was 6% on all the brands available for acquisitionand the prevailing P/E is 32, what would be the going rate price for this/thesebrand(s) chosen in Answer 2? (10 Points)
Exhibit 1Exhibit 4