Fiji Water Case

Our team recommends that Brandon move forward with his plan to invest in a Fiji Water distributorship in Monroe and Wayne counties, based on our analysis of market data and consumer surveys, Brandon's goal of becoming profitable within 2 years of operations, and realistic assumptions about costs, revenues, and market share in the years ahead. His project would not be profitable in the first two years (Net losses of $22,993.43 in 2012 and $5,099.54 in 2013), but with our projected estimates of increasing market share each year his project will break even in 2014 and earn increasing profits every year afterwards. We project Brandon to earn real profits of $50,783.66, $106,737.06, $162,757.72, and $218,842.78 for years 2014-2017. We reached these numbers by using a combination of market research data and assumptions about costs and growth rates. For example, for 2012 we calculated revenues by multiplying the population of the two counties (823,000) by the per capita annual consumption in gallons (29.3), the expected market share for Fiji (3.2%), and our projected wholesale liter price of $1.95. For costs we used Brandon's estimates of fixed costs and salary expenses, added expected commissions and taxes based on our projected revenues our estimate of cost of goods sold, and a $20,000 buffer for operating expenses.

After analyzing our market research, we estimate Fiji's market share will increase at an average rate of .3% per year from 2011-2017 in these counties. Consumer survey results showed 48.8% of those who tried Fiji water either "strongly like" or "like" the product. Furthermore, 81.2% of respondents in the market area "certainly will" or "maybe will" intend to buy Fiji water. From these results, we assumed this would lead to 39.62% of consumers in our market area trying and liking Fiji water, resulting in an upward trend on Fiji's market share growth. Given historical growth projection figures averaging .3%, it is reasonable to assume a continued growth projection at this rate, particularly in light of the positive 39.62% consumer response.

Qualitative factors supporting our recommendation pertain primarily to consumer perceptions about the Fiji brand compared to its competition. Based on consumer surveys we have identified a segment of the market that would be willing to pay a premium for good tasting and healthful water, and Fiji water was rated higher than its competitors in those two categories. Weaknesses in consumer perception include higher price and environmental unfriendliness. The latter perception could be alleviated with a marketing campaign addressing Fiji's recycling efforts at distributorships.

We purchased Tables A, B, C, and G to make a reasonable assumption of whether or not to move forward with the Fiji venture. We did not have actual retail and wholesale prices, so we estimated our numbers based on common knowledge of prices.

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