There was something interesting in our competitors' financials from last period: R&D spending in Clinites. The amounts spent mean that two of our competitors should be launching a new Clinites product in the coming period. It will be interesting to see which markets they are attempting to tap into. AF and MI are the furthest from anyone's current offerings, so they make for fairly ripe targets. MI is much larger than AF, so this is likely where both are going to pop up. One worrying prospect is an attempt to snag some share from SI, but our current perceptual position is incredibly close to the ideal for SI, so it would be quite the ballsy move for them to pursue that as their first R&D project. In response to this, we decided to launch another brand based on a previous project, this time TILT which is based off of TIME. TILT is directed towards the AF segment. We also began R&D projects that exactly match the desired characteristics for AF and MI. Next period these projects will replace TILT and TINK. As such, the ad spend for those two brands is going to be dramatically increased to increase awareness. Both brands are being given a $1.5m ad spend, and commercial teams and merchandising are being put into proportion with their segment's size relative to TIME and TINY's. This will give our actual AF and MI brands a huge head start when they're ready. Productions were set at 400k units for both brands. We are hoping that both will stockout. Since we will be shifting to different underlying projects, any inventory left at the end of the period will have to be eaten. The current production values have TINK making us $1m and TILT breaking approximately even. Any losses incurred here will be more than worth it in the next period when our brand offerings will 1) perfectly match their segment and 2) already have a sizable brand awareness.
Going back to the model, TINY's production will be set at 14m units, and TIME's production will be set at 3.4m units; both brands will have the same price as the previous period.
Results:
Wow.
So much to talk about here. Well first and foremost, we muffed our launch of TUGR into Nutrites. Production should have matched or exceeded what the predicted market size was, and the price should have been higher. The HC segment dropped significantly in their desired price, likely due to us anchoring at $60. To combat this, we are going to launch another Nutrites brand with ads aimed at the HC segment and a price in the $90-$100 range. However, that is not to say that the $131m in revenue and $99m in EBT didn't just shoot us into the stratosphere. TUGR's revenue represented 44.4% of our total revenue, and then 52.2% of our total EBT, which is thoroughly impressive. It looks like Nutrites is going to double in the next period, so these figures are about to get out of hand really fast.
The value for Clinites market as a whole looks like its growth in growth rate has begun to ebb. That's not to say the market is shrinking by any means, with the overall growth rate still a hefty 18%. The unit growth rate is still increasing, but only slightly. This continues the downward pressure on pricing in the Clinites market.
The SI segment is still rapidly growing, and accounts for the vast majority of the growth in the Clinites market. TINY again dominated this market, gaining even more share to climb to 65%. Most of this increase is likely due to the pivot that team Mimosa made with their MINT brand. Due to their pivot, they went from a 12% share to a 5% share of what is still a rapidly growing market. Extremely unwise move. For the pivot, they researched a product that would be directed towards the LI segment. Though by itself not all too terrible of a decision, but then they decided to modify their existing MINT brand with this lower quality product. That part was a terrible decision. This ill-advised move allowed team Riesling to pick up a couple of those percentage points, moving them from 15 to 17%, gave TINY a bump from 59 to 65%, and (surprisingly) gave TINK a 1% bump as well. Team Riesling also happened to R&D a product tailored for the LI segment. They, however, took the much wiser path and launched a whole new brand, RIBS. Though RIBS has the immediate disadvantage of lack of awareness and sales volume, it makes up for it by being extremely close to LI on most every perceptual map, even making it closer than the generic brands. MINT now has the unfortunate task of traveling across the perceptual maps to get to LI from SI. This will take at least one to two more periods, during which time RIBS is going to rapidly grow. MINT's share of LI went from 10 to 17%, but RIBS went from absolutely nothing to 7%. Most of these gains were pulled from the generic brands, but a couple points also came off of TINY's share, though we are not very worried about that. Perhaps next period we will begin the process of creating a brand for LI.
It was extremely surprising to see both teams go after such an unprofitable segment. Yes, the volume there is increasing at the second highest rate. Yes, our team is in a dominant position in almost every other segment. Yes, something needed to be done if anyone wanted to turn this around. But this was not the way to do it. Had they gone for projects for MI or for AF, they would have done extremely well. The research for those products would cost a slight bit more, but both teams had the extra few hundred thousand available. Those two markets are more profitable, less price sensitive, and are not susceptible to a price war.
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