Reliance Baking Soda is Stewart Corporation's oldest and most established product. The new Domestic Brand Director needs to create a 2008 marketing budget that delivers a profit increase of 10% over 2007 levels. She must first evaluate the effectiveness of past consumer and trade promotions and determine if a price increase will have net bottom line benefits. Then she must decide on the optimal allocation of her marketing budget, taking into account the brand's apparent "cash cow" role in the Household Division of Stewart Corporation. Students are expected to complete a quantitative assignment: create and defend a budget.

1. RELIANCE BAKING SODA
A Case Study | Optimizing Promotional Spending

2. CASE INTRODUCTION





Stewart Corporation was founded in 1915 by Stewart
Augusta who had discovered what he called the Miracle
Compound NaHCO3 (Baking Soda).
Reliance Baking Soda (RBS) a leavening agent has
been one of the strongest brands of the Household
Division of Stewart Corp.
Apart from being a baking agent RBS can also be used
as a substitute for cleaners, air fresheners, laundry
detergents etc.
Anna Regnante who has managed one of Steward
Household Division’s weaker brands has been recently
promoted to the position of Domestic Brand Director
(RBS).
She has been assigned with a task to come out with
2008 P&L budget within 3 weeks.

3. OBJECTIVES
Our primary objective is to develop a budget that
will increase RBS profits by 10 percent (before
SGA, Overheads and Taxes) over 2007 estimates.
 Optimize trade promotion strategy.
 Reallocate budgets for promotion and
advertisements.


4. LIMITATIONS

Trade considers it to be boring and low traffic

No direct control over how trade manages inventory

Private Label selling at 30% lower prices

Market Share reduced by 5% in the last decade

Low Advertising Recall

5. LIMITATIONS (CONTINUED)

Specialized products cannibalizing baking soda.

Majority products sold during Trade Promotions.

Consumption patterns remained unchanged for the
last 3 years.

Old fashioned mainstay product.

Overstocked Trader Inventory.

After brainstorming and analysis of past year data.

6. ROOT CAUSE DIAGRAM
Overstocked
Inventory
Low
Advertising
recall
Boring and
low traffic
Trade
promotions
Market share
reduced
Old
fashioned
Private
label

7. STRENGTHS
Trusted Brand RBS
 Clear Market Leader - 70% market share with 85%
US household penetration
 Enjoys high distribution penetration. 80% to 90%
 RBS promoted for a wide range of uses including
household cleaner, laundry aid and deodorizer.
 Widely viewed as a substitute for specialized
cleaners, air fresheners, and laundry detergents
 Excellent Brand Awareness and Loyalty. 95%
mentioned RBS when asked about Baking Soda.


8. OPPORTUNITIES

Baking Soda considered as inexpensive by 80%

Trade promotion events have produced attractive
results in the past.

Baking Soda already promoted by RBS as pet care,
pool care, outdoor cleaning, baby care.

Only 50% used it as a multipurpose product.

9. OPPORTUNITIES

Out-of-the-box uses for the product such as Sport
equipment cleaning.

66% males and 48% females use sport equipment

27000 gyms in USA

Suggested Product doesn’t break off from the
Brand Lineage of the household division

10. RECOMMENDATIONS –
CONSUMER PROMOTION

10% Price rise across all product ranges.

Promotion through Top 4 Women Magazines

Reintroduction of the highly demanded Twin
Packs.

Loyalty Bonus - Redeemable 30¢ Coupons

11. INNOVATIONS

Website Adds and Online Interactive
Promotional Games

Communication through Sport Magazines, Pet
Care Magazines etc.

Contribution to World Food Program from
respective packs as (10¢/8oz, 20¢/1lb & 1$/5lb)

12. THE SUPPLY CHAIN
Supplier
Manufacturer
Trader / Mass Merchandise /
Workhouse
Consumer

13. RECOMMENDATIONSTRADE PROMOTIONS

Re-emergence of the Buying Allowance.

Free Cases with a Minimum Order.

Performance Discount Incentive
(10% OI with evidence of featured Trade Ad)

Twin Packs

Target Schemes

14. Year
2006
Period
January
April
June
August/
September
November/
December
January/
February
2007E
April
May
Promotion days
41
21
Twin Pack/Refund
43
Sweepstakes and Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
Refund
& 5% ad
& 5% ad
& 5% ad
12 % Off
Invoice
50
40
20
21
January/
February
April
41
21
Self liquidating
premium
Coupon
August/
September
November/
December
38
50
50
15 % Off
Invoice
10 % Off
Invoice
10 % OI + 5%
ad
10 % OI + 5%
ad
Scheme 10 +2
10 % OI + 5%
ad
22
May/ June
Scheme 10 + 2
& 5% ad
38
June
2008E
Promotion Activity
8 Oz
1 lbs
5 lbs
Refund
Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
Cross-ruff Coupon
Scheme 10 + 2
Refund
Coupon
Scheme 11 + 1 Scheme 11 + 1 Scheme 11 + 1
Scheme 10 + 2
Twin Pack/Refund
Scheme 10 + 2
& 5% ad
Target Scheme
Target 250 get
50 extra
Target 250 get
50 extra
Target Scheme
Target 250 get
50 extra
Target 250 get
50 extra

15. THREATS
Fiddling with an established Brand and Loyal
Customers.
 Targeting a different consumer segment might not
be accepted by customers using established
products.
 Price rise may move customers towards purchasing
Private labels over RBS.
 Declining importance of Baking Soda to Bakers
because of Self Rising and Instant Cake mixes.


16. FINAL BUDGET FORECAST

19. 2005
2006
2007E
8 oz
$6.18
$6.37
7.2
1 lb
$10.33
$10.64
5 lb
$46.63
$48.03
2008IE
2008E
Manufacturer's price per case
7.92
7.82
12.02
13.222
13.02
54.28
59.708
58.708
Factory shipments(in 000's of cases)
0
0
8 oz
640
793
714
714
800
27.70%
1 lb
1099
1362
1226
1226
1350
46.50%
5 lb
581
720
648
648
750
25.80%
Variable manufacturing cost per case
0
0
8 oz
$3.02
$3.05
3.38
3.718
3.41
1 lb
$4.98
$5.03
5.58
6.138
5.63
5 lb
$22.12
$22.34
24.8
27.28
26
Gross sales
$42,400
$54125
55051
60556.1
67864
Variable manufacturing cost
$20,258
$25354
25325
27857.5
29828.5
Gross margin
$22,142
$28771
29726
32698.6
38035.5
52%
53%
54%
54.00%
56%
$2,862
$4453
3815
4196.5
4000
Print
$687
$950
694
763.4
1500
Internet
$76
$238
248
272.8
1000
Total Advertising
$3625
$5641
4757
5232.7
6500
PR/media production cost
$191
$297
198
217.8
198
Consumer promotion
$424
$1080
551
606.1
1400
Trade promotion
$4240
$5938
5505
6055.5
8977.5
Total marketting expenses
$8480
$12956
11011
12112.1
17075.5
$13,662
$15,815
18715
20586.5
20960
Advertising
Tv
Profit before SG&A, Overhead and Taxes

20. BUDGET FORECAST
70000
Profit before
SG&A, Overhead &
taxes
Promotion Costs
60000
50000
40000
30000
Total Advertising
20000
Variable
Manufacturing Costs
10000
0
Year
2005
Year
2006
Year
Year
2007E 2008E

21. BOTTOM LINE GROWTH
$25,000
$20,000
$15,000
Series1
$10,000
$5,000
$0
2005
2006
2007
2008

22. THANK YOU
RBS – A Houseful of Uses