Case summary

Chemical Products Limited (CPL) had achieved a breakthrough in evolving a process for the
production of synthetic menthol, which was equivalent to natural menthol in all respects. Menthol
would be a new product for CPL's product line.

CPL had to decide about whether to commercially produce synthetic menthol through the recently
developed process and if yes, what should be the size of the plant.

In order to make this decision, CPL had to consider the gap between the domestic supply and
demand of menthol in order to view the viability of the market. CPL also had to consider the prices
of menthol in both the domestic as well as the international market since imports from the
international markets and exports to the international markets would impact the viability of
production.

For evaluating the above factors of decision-making, CPL would need to gather data in order to make
an informed decision. The broad data required was:

(i) an assessment of current and future demand of menthol in India for the current year
and up to the next five years in terms of quantity (tons) and rupee value, split into the
organised and unorganised sector
(ii) an assessment of prices paid by different segments / types of users to understand
whether CPL would like to sell to all segments or only a few segments
(iii) an assessment of the current and future production capacity of menthol, mentha oil and
menthol arvensis grass for the next five years including level of utilization, profitability,
and future plans of different groups of manufacturers. For menthol and mentha oil,
production quantities and prices of main and by-products would be required as well,
whereas for menthol arvensis grass, acreage under crop, yield per acre, prices of grass
and economic return of the crop vis-à-vis other crops would be required.
(iv) an assessment of international trade in menthol.

Data was obtained through primary and secondary information sources. Within the organised sector,
demand was assessed from each major producer of the end use product, which was supplemented
from secondary sources wherever possible. In the unorganized sector, information was primarily
sourced from manufacturers, wholesalers, retailers, or other knowledgeable people in the industry,
and partly from secondary sources. Within each sector, an attempt was made to cover a substantial
portion of the market for each product group.

Based on the limitations of gathering information from particular sources, alternate methods of
information collection were sought. Wherever primary data could not be obtained due to
constraints such as lack of information with the end users or smaller sample size of primary data,
secondary data was considered as an alternative.

The aim of the data collection exercise was to increase the confidence of getting accurate, reliable,
and relevant information so that CPL could make an informed decision on whether to go ahead and
set up the plant, and what should the plant size be.