ColScene.

xls

Profits for Precision from Mainstream Strategies under different Scenarios

year 2

**Mainstream with
no Precision
introduced and with
competition
year 1

year 2

27.0
8.0
35.0

44.0
8.0
52.0

27.0
8.0
35.0

44.0
8.0
52.0

$1.76 (main)
Proff price =
$0.82

47.5

77.4

47.5

77.4

6.6
54.1

6.6
84.0

6.6
54.1

6.6
84.0

$0.64 (main)

22.4000
32.8000
0.8867
56.0867

33.2800
29.0000
1.2667
63.5467

22.4000
32.8000
0.8867
56.0867

33.2800
29.0000
1.2667
63.5467

-2.0067
12.5366
-14.5432

20.4533
18.6258
1.8276

-2.0067
0.0000
-2.0067

20.4533
0.0000
20.4533

0.0000
-14.5432

0.0000
1.8276

14.6260
-16.6327

21.7301
-1.2767

Source of data
Unit Sales
[2] Retail unit sales (m)
[3] Professional unit sales (m)
[4] Total unit sales (m)

Table C
Table C
[2] + [3]

*Mainstream With
Cannibalization and
no Competition
year 1

Dollar Sales
[5] Retail dollar sales ($M)

[2] * manuf. Price

(Table E)

[6] Professional dollar sales ($M)

[7] Total dollar sales ($M)

[3] * [15]
[5] + [6]

[8] Manufacturing costs ($M)

[9] Advertising & promotion ($M)
[10] Capacity costs ( $M)
[11] Total costs

[4]* manuf. Cost

(Table E)
Table E
[16]
[8] + [9] + [10]

[12] Operating profits ($M)

[13] Costs of cannibalization ($M)
[14] Profit after cannibalization ($M)

[7] - [11]
[17]
[12] - [13]

[18] Cost of Competition ($M)

[19] Profit after competition ($M)
[15] Professional unit price = $0.82 = 80% * $0.79 + 20% * $0.95 (p.10)

[16] Capacity costs per annum are derived from Table D. In order to achieve that planned capacity volume, a certain number of tufter,
mold, and packaging machines must be purchased, and the investment cost is spread over the depreciation perioSee the next page of the spread sheet
[17] Cost of cannibalization =
[18] Cost of competition

See the next page of the spread sheet

See the page 3 of the spread sheet

*In this scenario we assume that competitors will not introduce any new products while Colgate will introduce Precision. By introducing Precision
Colgate will cannibalize from Colgate Classic & Colgate Plus.

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ColScene.xls

**In this scenario we assume that competitors will introduce new products while Colgate will not introduce Precision. Colgate will lose 70% of its market.
Capacity Cost Calculation using table D (all values in Millions)
is spread over the depreciation period.
Mainstream
Source of data
[1] Unit volume (m = millions)

Scenario and Year

Mainstream Year 1 (42 M units)

Mainstream Year 2 ( 59 M units)

Additional 17 M units

year 1
Table E

year 2
42.00

59.00

Number and Type

of equipment

Cost and
depreciation

Total Annualized
cost

14 Tufter
6 Handle molds
2 Packaging

14*0.5/15
6*.3/5
2*.15/5

0.47
0.36
0.06
0.89 Total

6 Tufter
3 Handle molds

6*.5/15
3*.3/5

0.20
0.18
0.38
1.27 Total

Contribution per unit

Contribution = Price/unit - Variable cost/unit
(91611In this case we use the 1992 E figures from Exhibit
1 to get at price /unit and variable cost/unit as (net sales -cost of sales)/units
Unit contribution =
44846)/78336
0.5969796773
Cost Of Cannibalization
Cost of cannibalization =
Total sales X Unit Contribution X% Cannibalized
% cannibal From Classic and Plus (Table E)
Total unit sales
From [4]
Contribution per unit
Calculated above
*In this scenario we assume that competitors
will not introduce any new products while
Colgate will introduce Precision. By introducing
Precision Colgate will cannibalize from Colgate
Classic & Colgate Plus

Cost of cannibalization =

Mainstream With
Cannibalization and
no Competition

year 1

year 2

12.5366

18.6258

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ColScene.xls

Cost of Competition
Assumption: Competition takes 70% of Colgate's market
Cost of competition = 0.7 X Total Unit sales X Unit contribution
**In this scenario we assume that competitors
will introduce new products while Colgate will
not introduce Precision. Competition will take
away 70% of Colgate's market.

Cost of competition ($M) =

Mainstream with no
introduction of
precision and with
competition
year 1

year 2

14.6260020935

21.7300602533

Page 3