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Name: Sukriti Grover Roll No: 2014HRLP006

DRYPERS CORPORATION CASE STUDY


INTRODUCTION Drypers Corporation is a producer and marketer of premium-quality; value-priced disposable baby diapers and training pants sold under the Drypers brand name. The company is the worlds sixth largest producer of disposable baby diapers and the third largest market er of brand-name disposable diapers in the U.S. The company is the worlds sixth largest producer of disposable baby diapers and thethird largest marketer of disposable diapers. Disposable diapers and training pants are distributed principally through grocery stores, drug stores and mass merchants. PROBLEM STATEMENT In accordance with the increasing trends in the US disposable diapers and training pants market from 1994 to 1997, the question that arises is that, should Drypers Corporation spend 10 million dollars on national television advertising for its Drypers brand disposable diapers. $10 million expenditure represented a 33% increase in the companys combined advertising and promotion budget. In 1997, the advertising and promotion was budgeted at about $30 million. ALTERNATIVES Option 1: Rejecting the 10 million dollar budget: If they incur additional expenditure there is a risk of not recovering the 10 million dollar expense. As they have never used T.V. advertising, The company has focused on in store promotions, etc.But, if the company doesn't advertise through the right channels they would continue to reach only 33.8% (Exhibit 1) of the Market, a market that has been declining over time. Option 2: Accepting the 10 million dollar advertising budget. Advertising will definitely improve Drypers brand awareness, as well as increase The distribution coverage. It will also Facilitate entrance into Mass Merchandise and Drugstore Markets.But there is a risk that the sales Might not increase enough to cover the 10 million dollar expense And company would end up tripling the current advertising expenditures. RECOMMENDATIONS It is recommended that the company accepts the 10 million dollars for National Television Ads. Drypers has a differentiated product that could be emphasized in advertising. A percentage of total sales compared to their Drypers Brand have shown it decreasing the past couple of years. The national television advertising will get an increase is brand awareness, and in turn more sales. The two giants, (Kimberly-Clark, Procter and Gamble), spend around 2/3 of their budgets in television. This should be a signal to Drypers that if they want to increase market share and get into the mass merchandise/ drugs store market they need to get a better brand recognition. Their also needs to be at least a 17% (Exhibit 2) increase in total sales in order for Drypers to break even in their advertising expense. This can be done due to the fact that they had 16% increases from 1997 to 1996 sales, and this advertising campaign will not Increase their sales grocery stores, And also gives them an opportunity to break further into the mass merchandise/drug store market.

Exhibit 1 Drypers total dollar market. = 3.1% Drypers Corporations distribution coverage in grocery stores = 66% % of total U.S. diaper and training pant sales = 51.2% % of the total market = (66% x 51.2% = 33.79%). = 33.8% Exhibit 2 Total Domestic Sales = $191,300,000 Gross Margin = 38.8% Additional Sales Needed to Break Even (38.8/100 = 10 Mil/X) = $25,773,195.88 Percent Increase in Sales = ($25,773,195.88/$191,300,000) 13.47% Break- Even Sales = 17% approx