Given that most of our strategies have been working very well, not much will need to be changed in the Clinites market. We will be launching our LI segment product, TILI, this period. Hoping for a big splash, production is at 6 million units and the ad spend is $2 million. The LI segment is forecast to grow to 19 million units from 16 million. Looking at what happens in our previous trend of launching tailored projects, nabbing at least a quarter of the market does not seem out of the question. Granted, the previous projects had a little bit of brand awareness going in, but to counter that we are pricing TILI at $9, which is $1 below what the segment leader, MINT's price is, and $1 above the segment's ideal price of $8. Though we may end up with a bit of inventory at the end of the period, running out would put us in an even worse spot. And, as was shown last period with the TUGR debacle, even massive over production costs are a drop in the bucket compared to lost sales.
TINY is about to get a face lift with a new underlying product that is specifically tailored to the SI segment. Sales of 20.3 million units last period ran past planned production of 18 million, but luckily we did not stock out. Since the underlying product was modified, we will likely see a fairly sizable bump in sales, but we are beginning to reach the limit on how much we can grow our share of the SI segment. TINK did surprisingly well, so we think that 5 million units of production is more than warranted. With inventory building up in TIME, a production reduction down to 2.7 million units should help us clear out the glut. TILT also had a small amount of inventory, but we should see that cleared out this period as well with only 2.5 million in production.
With TUNA's underlying product coming in, a 3.5 million run on top of a drastic price reduction should push volume. With price perceptions at extreme highs, both TUNA and TUGR will be reduced in price 25%. For TUGR, this brings us much closer to the ideal price for the EL segment. It is still off by quite a bit for TUNA, but this is the time for TUNA to skim as much margin as possible.
Ad dollars are at pretty much the same level across all of the brands. Though the experiments tell us to increase ad spend in certain areas, right now it is just not affordable with such a constrained budget and so many brands in our portfolio. If this becomes too much of an issue, we should explore shelving a low-profitability brand. Or slash its budget to shift resources into brands that could either use help or could have a big boost.
Next period, the need for our sizable commercial teams will have to be explored as a potential cost-saving measure, especially if we do not see a sizable gain in our budget. Without a gain, it will be difficult to R&D a third Nutrites product with so many other products in our portfolio.
At first we were worried that a team may be entering Nutrites this period, but their investment of $2.7 million is not nearly enough capital to complete a Nutrites project. The cheapest Nutrites project that we were able to estimate was $4.28 million, and that was with every attribute at a 10 out of 100. That means we have at least one more period of Nutrites dominance. Team R (the ones that invested), had their budget jump by a large margin this period, so they will have more than enough to enter the market. Hopefully they will use the same methodology for their RIBS R&D, since it ended up not aligning with the LI segment's ideal product.
For a last minute change, the decrease in price for TUGR and TUNA will not be as drastic. With the market still closed to outsiders for at least one more period, perhaps skimming more margin would be a better tactic. At the $45/unit price point, the first 2.6 million units beyond our sales from last period would be going towards covering the lost margin of approximately $9.22/unit (not $15 because our average selling price is ~61% of the retail price). We will instead have to depend on the first 1.5 million units after passing our previous period, a much more manageable figure, which could also be easily covered by the increase in volume simply due to the price break. With this price move, we should hopefully be able to see what the elasticity is, but due to the shift in TUNA and the change in its underlying product, the results may be a bit muddy.
Results:
Ouch. This decision shows the truth of the axiom "if it ain't broke, don't fix it," and boy did we break it. Over 7 million in unit sales lost for TINY compared to last period. Over 9 million in inventory just for TINY. One major issue can be seen in the semantic perceptual maps. TINY is lined up with every single metric except for price, even though price did not change at all. TINY is currently perceived as being too expensive. So the question now becomes: should we change the price or pump ad dollars into shifting the perception of our price? Possibly a combination of the two will bring the market back together like it was in previous periods. We lost over a third of our sales for TINY, dropping from 20.3 million units down to 13.2 million. This fluctuation cost us $37.8 million in contribution margin. It also cost us $2.2 million in holding costs. All-in-all this hurt. A lot.
The Clinites market as a whole increased in terms of unit size by just under a million units. This is tiny when compared to the 14 million unit increase in the previous period. The value of the market decreased by $37 million, so this means that new consumers in the market (and current ones) are shifting to cheaper products. Part of this could be a result of the fight that is currently taking place in the LI segment between us, Riesling, and Mimosa. Our retail sales for the period actually dropped in Clinites for the first time thus far in the simulation. Hopefully this is the only time that happens. If and when the market begins to saturate, we may need to look towards slow-paced growth instead of our hyper-aggressive strategy.
We may have reached saturation in the Clinites market. There are only 80 million people in our market. That would be upsetting. There were ~68 million units sold last period. The market forecast calls for continued growth (and unfortunately most of that comes from the LI segment), but as last period showed, that forecast can be very, very wrong. Something that is also worrisome is that the competition in the LI segment may be what is driving the growth there, and the lack of competition in SI is why there has been a contraction.
Our SPI only rose 323 points this period. This is less than half our worst period's SPI growth, and that was due to spending most of our budget on R&D for Nutrites. Hopefully this just ends up being a breather before we start climbing at a faster rate again. Some threats coming down the pipe are going to come from teams Mimosa and Riesling entering the Nutrites market next period. Both teams have had shoddy product launches in the past, so hopefully they muff their Nutrites entrances as well. Their R&D expenditures are well over $8 million, so it is likely that they are planning on going after either the HC or FA segments, which we are more than okay with.
Nutrites definitely carried us this period. We over produced for both TUGR and TUNA, but their margin is just so outrageous it is not too much of a worry, though we will need to start running more lean in Nutrites as competition enters the market. TUNA's production for next period will have to be relatively miniscule, because we currently have more units in inventory (1.6 million) than we had sales for all of last period (1.2 million), and an anemic growth forecast for the HC segment (13.3%). TUGR was left with 974k units in inventory, but growth is expected to more than double to 10.9 million units from 4.2 million units last period for the EL segment. Nutrites overall brought in $320 million in revenues and $252.8 million in CM. This blows Clinites out of the water, which only had $212.6 million in revenues and $99.5 million in CM. One reassuring thing from this period is that our (relatively) small revenue growth of $64 million from last period is more than the total revenues for three of the other four teams.
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