Marketing Strategy Case Study:

Automatic Detergent Market in Egypt

The Automatic Detergent market in Egypt has faced a turnaround following the
devaluation of the Egyptian Pound in 2003. Prices had to increase significantly due
to the increase in the cost of imported materials.

This market is segmented into: 1) High-Tier Brands (Ariel & Persil); 2) Mid-Tier
Brands (X-tra); and Low-Tier Brands (Lang & Others).
The 2003 total market size is 1,000,000 units sold.

Below is the status of market shares in 2002 (before devaluation) as well as the
price per brand:
Brand Company Market Share Unit Price (LE)
(2002)
Ariel P&G 50% 100
Persil Henkel 25% 100
X-tra Henkel 5% 80
Others (Low-Tier) - 20% 60

General Cost Information for Ariel (2002):

 Cost of Goods sold was 60% of sales
 Administration costs was 10% of sales
 Ariel spent LE 5 Million on Marketing
 50% of the Cost of Goods Sold was from imported materials

New Cost Information for all brands (2003):

 Local Inflation driven from devaluation was projected to be 20%
 The Egyptian Pounds was expected to lose half of its value in 2003 (from
1$=3.4LE to 1$=6.8LE)

Requirements:
1. Analyze Ariel’s profitability in 2002 and calculate its profit margin (% sales)
2. Which price would yield the same profit margin in 2003?
3. The table below presents Ariel’s 2003 expected quantities at different prices
Price 100 110 120 130 140 150
Volume 500,000 450,000 400,000 350,000 300,000 250,000
What would you recommend P&G to do in light of this new situation?