Based on the current information, I recommend that we move forward with the production and launch of Odor Eaters brand deodorizing socks in four different styles at an average price of $5.99 per 3-pair pack. Given our pricing structure, advertising investment, and other costs, we will have to increase our sales by over 14% in the first year and 21% (cumulative) in the second year for this to be a success. With a current market share of 10%, increasing it to 15% in two years can happen as a result of the following:
• Consumer test markets show that Odor Eater socks:
o Create customer loyalty
o Will sell at a higher price point
• Focused, capital intensive marketing campaign ($3+ million over two years)
• Increased distribution to include previously un-tapped retail channels (15,000 stores)
As a result, Chipman Union will breakeven in Year 1 and will begin seeing profits before the end of Year 2.
THE MARKET PLACE
In 1979, 289 million dozen pairs of hosiery were sold in the United States; 37 million of which were in the boys’ / mens’ casual/athletic segments (about 55%). Of this market, 25% of the socks are considered “branded” with competitors Burlington and Interwoven commanding 80% of the branded market. The deodorizing segment has also shown growth in the past few years, with a current share of 30% of the boys’ / mens’ casual/athletic. Within these groups, we carry a 10% share of the boys’ / mens’ casual/athletic socks (approximately 3,700,000), with 10% of those being antimicrobially treated.
CUSTOMER BEHAVIOR
In general, hosiery has a low brand awareness and is not planned purchases. The demand for tube socks has grown dramatically in the last 10 years with shipments rising from 1% to over 50% in 1979. This t ...