Consumer Segmentation and Targeting

Author Names

University

Consumer Segmentation and Targeting

The target market for the new products will be consisting of children, male and female adults, and other household consumers with income levels starting from $8,000. The new pastry offerings also target consumers with a preference for vegan dishes and climate conscious individuals. The main product variations will be packaged in oval metal tins minimizing the use of plastic in accordance to the sustainability objectives pursued by the company. In addition, the Beavertail cookies will be availed as a grocery store product ensuring accessibility to consumers within walking distance of the store location, 10-mile driving distance, and even farther depending on online retail range.

The new Beavertail products will target businesses, individuals and groups in and around Ottawa by offering doorstep deliveries enabled by the recently launched online shop, Pantryshop.com. The preference for online retail channels is guided by the recent changes in consumer behaviour in favour of online purchases and as such, enhances the company’s strategic positioning.

The five new products will be based on the classic, hazel amor, pecan pie, apple pie, and bananarama pastry lines based off the Beavertail brand. Consumers will be able to purchase the products at the commencement of production meaning that the company will be able to target consumers who are continuously adopting internet ordering in response to the current global pandemic. Besides offering consumers healthy and environmentally conscious pastries, the products will all be available for online purchasing guaranteeing the current health concerns of the target market.

Financial Plan

The financial forecast is based on estimated sales volumes given the size of the target market. Projected net sales for years 1,2,3,4, and 5 are $49,200,000, $49,700,000, $50,200,000, $50,500,000 $50,800,000, and $60,100,000 respectively. Gross Profits are expected to amount to $98,400,000, $99,400,000, $100,902,000, $102,010,000, $103,124,000, and $122,604,000 for the next five financial periods while maintaining a constant gross profit margin.

The projected income statement reflects a favorable position for the company due to incremental net revenues expected over the next five years. Other income statement assumptions and estimations have been used to construct a financial model that can be used to evaluate various changes to the estimated incomes and expenses including price maneuvers. The financial model of the projected income statement and the assumptions therein have been presented in the table below.

5-year Financial Forecast 2020 2021 2022 2023 2024 2025

Assumptions Revenue Units 49,200,000 49,700,000 50,200,000 50,500,000 50,800,000 60,100,000

Price $5.42 $ 5.42 $ 5.43 $ 5.44 $ 5.45 $ 5.46

COGS Unit cost $ 3.42 $ 3.42 $ 3.42 $ 3.42 $ 3.42 $ 3.42

Expenses 76,200,000 74,500,000 68,700,000 65,400,000 60,300,000 54,200,000

Depreciation Expense 500,000 500,000 550,000 530,000 500,000 500,000

Interest Expense 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000

Tax Expense Income Statement Sales Revenue 266,664,000 269,374,000 272,586,000 274,720,000 276,860,000 328,146,000

Cost of Goods Sold 168,264,000 169,974,000 171,684,000 172,710,000 173,736,000 205,542,000

Gross Profit 98,400,000 99,400,000 100,902,000 102,010,000 103,124,000 122,604,000

Gross Profit Margin 37% 37% 37% 37% 37% 37%

Operating Expenses 76,200,000 74,500,000 68,700,000 65,400,000 60,300,000 54,200,000

Net Profit (Loss) 22,200,000 24,900,000 32,202,000 36,610,000 42,824,000 68,404,000

Depreciation Expense 500,000 500,000 550,000 530,000 500,000 500,000

EBIT 21,700,000 24,400,000 31,652,000 36,080,000 42,324,000 67,904,000

Interest Expense 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000

EBT 19,900,000 22,600,000 29,852,000 34,280,000 40,524,000 66,104,000

Taxation Expense 1,200,000 1200000 1200000 1200000 1200000 1200000

Net Earnings 18,700,000 21,400,000 28,652,000 33,080,000 39,324,000 64,904,000

Breakeven Analysis

The expected fixed costs amount to $20,000 and each unit is expected to cost $3.42 in variable cost. The expected selling price of each unit is $5.42. This information has been used to measure the breakeven point represented in the table and graph below.

Breakeven Variable Cost 3.42

Selling Price 5.42

Fixed Cost 20,000

Units Fixed Cost Variable Cost Total Costs Revenue 0 20000 0 20000 0 Breakeven Point 10000

5000 20000 17100 37100 27100 10000 20000 34200 54200 54200 15000 20000 51300 71300 81300 20000 20000 68400 88400 108400 25000 20000 85500 105500 135500 30000 20000 102600 122600 162600

In order to breakeven, the company needs only sell about 10,000 units. This amount is achievable within the first quarter of operation is the current market conditions prevail.