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To: Mr. Mclvor,

From: Echo - im89011

Subject: B.C. PACKERS CASE MEMO

Date: May 5, 2011

Case Background

Canadian cat food market showed arising opportunity in 1987. B.C. Packer, the famous market leader in both canned salmon and tuna provider was considering the possibility of entering the Canadian cat food market, in order to get more profit from its by-product instead of just cover its cost by selling commodity bulk of fish meal. Therefore, a study with detail analysis based on all the information …show more content…

It seems that gourmet brands product could be more attractive. So I did my analysis start from gourmet market.

NPV analysis

Some assumptions: Market price will be decline 5% from the 3rd year 10% Advertising cost decrease will happen from the 5th, benefit from the long term

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Sales growth almost meets the market growth Working capital: 85% of annual operating cost 20% return rate

Assume market share is only 7% of gourmet market in 1989 when the company spent $650,000 advertising for promotion. NPV still shows a good result in the following 10 years. See EXHIBIT 3 for NPV of gourmet product. However, calculated NPV of price and national brand products is both negative by using the assumption of 5% and 10 % of market share. Obviously, gourmet brand products would be a best choice in current situation.

Customers always like creative products. So we though that to get more utilization of product line, a pull-tab cap would bring added value. At least 2% more market share will be achieve without any additional advertising expense. Further