Alma Products, Inc. is a new business venture of Julie Brighton. Brighton is a former consultant and retail executive that view this new opportunity as a way to have fun and make some money. The first and only product that Alma Products is currently working on is the Easy Embers Charcoal Starter. This device is modeled after similar homemade charcoal starters used by campers. The barbecue industry is continuing to grow offering a potential market for this product. Barbecue grill sales, as well as charcoal sales have increased over the past few years.
Although the number of households with charcoal grills has decreased, those who are using them are doing so more frequently. These frequent charcoal barbecuers will make up the target market that Alma Products should focus on.
Alma Products will be working with a broker, Davis & Davis, to sell Easy Embers. They will also be working with Santa Fe Engineering to manufacture and ship their product. Relationships have been established with these organizations that will be beneficial with respect to costs and exposure of the product. Davis & Davis currently have clients within the barbecue and summer seasonal industry. These connections will provide Alma Products with a jump-start into the market. Santa Fe will manufacture the product for a reasonable cost, and then will ship it directly to the retailers eliminating the need for warehousing. The main profit goal of Alma Products is to break even. Our financial analysis shows that they will indeed be able to do this.
The largest obstacle for Easy Embers will be the wide use of lighter fluid. This is the most common and cheapest method used to start barbecue fires. It will be difficult to get a large number of consumers to change their habits and buy into a new product. Alma should focus on frequent barbecuers as their target market, and tailor their promotion to this group. Even with a small percentage of frequent barbecuers purchasing Easy Embers, Alma Products, Inc. will be successful.
The barbecue industry has become increasingly successful. Consumers are spending $4.35 billion annually on barbecue related items. This includes an increase in the sales of barbecue grills as well as charcoal briquettes. The Easy Embers Charcoal Starter has a promising future in this market. This is a unique product, with only one other organization manufacturing a similar item. This competitor is also new, and has no relationship with any large retailers. It can only be found in a few small individually owned hardware stores.
In addition, this company is not even listed in the telephone directory for its area. The real competition that Easy Embers faces is from lighter fluid manufacturers. Lighter fluid is a cheaper, widely used method of starting barbecue fires. The manufacturers of Easy Embers will need to focus on the positive aspects of their product when compared to lighter fluid. They are offering a cleaner safer product that actually starts the barbecue fire in half of the time.
Easy Embers Charcoal Starter is the first and only product currently being sold Alma Products, Inc. The organization is new, as well as the product. The company is a business venture of Julie Brighton, former consultant and retail executive. The Easy Embers product was modeled after a homemade product Brighton had seen campers using. She is looking at her new company and product as a way of having some fun and making money with this great idea. The firm is fortunate in that it has minimal fixed costs (estimated at $500 per month).
In addition Brighton has retained a manufacturer’s representative agency, Davis ; Davis Associates. This organization represents other barbecue grill manufacturers as well as manufacturers of other summer seasonal products. Davis ; Davis will handle the selling of Easy Embers for a 10% commission on all sales made to retail stores. This is less expensive than hiring an internal salesforce, and Davis ; Davis already has established contacts with retail buyers in the barbecue industry. Brighton has also worked out a reasonable agreement with a local sheet metal fabricator, Santa Fe Engineering, Inc. Santa Fe will manufacture, package, and ship Easy Embers directly to Alma’s customers. Charges by Santa Fe include a one time tooling cost of $10,000. Easy Embers will be manufactured in 1,000 unit lots with a cost of $3.00 each. In addition, the shipping costs are variable depending on the number of cases being shipped.
C. Marketing Strategy
Alma Products has already made a good start towards a successful marketing strategy for this product. Through their relationship with Davis and Davis, they are able to keep overhead costs to a minimum and take advantage of the connections the broker has already established within the barbecue industry. Alma is focusing on the benefits of their product’s use, when compared to lighter fluid (its biggest competition). They should continue to do this, while concentrating on a target market of frequent charcoal barbecue users. With respect to the marketing mix, Alma Products has a unique product that can be produced fairly efficiently. Because of its newness, it will peak the interest of heavy-duty barbecuers. However, they will face some difficulty in getting the majority of barbecue users to break their habit of using lighter fluid. Alma has already made the decision to focus on a target market in California.
They will target retail stores including home centers, hardware stores, and mass merchandisers. With respect to place, this is a good beginning. They should concentrate on becoming successful in this area, before trying to expand to other locations. As far as promotion, Easy Embers is attractively packaged and has developed print ads. They could benefit from setting up store displays or end caps. However, they should first utilize their brokers to get into the important stores. Price is the last part of the marketing mix that needs to be addressed.
It is important for Alma Products to review their financial information before setting a price. They will then also be able to see how much money they can afford to spend on advertising and promotion. (See the Financial Analysis Appendix). The other organization with a similar product has set a retail price of $9.95. This should also be taken into consideration when developing their pricing strategy.
III. Problems Found in Situation Analysis
A. Statement of primary problems
The biggest obstacles for Alma Products come from its largest competitor – the manufacturers of lighter fluid. Lighter fluid is a more commonly used, easily available method of starting barbecue fires. It is also very cheap. One bottle, which is good for numerous fires, sells for approximately $2.00. In addition, because lighter fluid has been the old standby product used by most consumers, it will be difficult for Easy Embers to break into the market. It would mean that people would not only need to change their habits, but do so in order to use a more expensive product.
Although there is some segment of the market that would be intrigued by such a new product, the majority would most likely stick to what they are used to. However, Alma Products is not looking to make a huge profit, they are trying to break even. This will take off some of the pressure with regards to how well accepted their products is, and what price they will be able to sell it for.
IV. Strategic Alternatives for Solving Problems
A. Description of Strategic Alternative 1
In order to respond to the potential problems for Easy Embers, Alma Products will need to do several things. First they will need to do financial analysis to determine if they will in fact be able to break even with this new product (see Financial Analysis Appendix). After doing so, and determining that it is beneficial to move forward with the product, Alma will need to have an extremely focused target market. They will need to focus on the consumers who have a high frequency of charcoal barbecuing. Within this group, there will be a small percentage of consumers who will be willing to try a new product (the innovators/early adopters). This is the core group Alma Products should be reaching. When promoting Easy Embers Alma Products should focus on the positive aspects when compared to lighter fluid, and keep it as reasonably priced as possible.
V. Selection of Strategic Alternative and Implementation
Per our Financial Analysis, we have determined that Easy Embers is a viable product and that Alma Products, Inc. will indeed be able to break even or possibly even make a profit. The product should be sold at $9.95, the price that has already been established by a similar product. Through their contacts with the retail stores and barbecue publications, Davis ; Davis should be able to assist Alma Products in determining their core target market. Alma could then focus its promotion towards this group, perhaps using direct mail or in store displays.
Alma Products will need to make the most of their resources to establish a base of customers during their first year. There is the potential for other manufacturers to begin making similar products, especially if Alma is successful in its first year. They should develop as many loyal customers as possible, and reevaluate their situation after each barbecue season. They may eventually need to expand the organization, or partner with a larger company in order to remain successful.
Easy Embers Charcoal Starter is the first and only product being distributed by Alma Products, Inc. Julie Brighton, a former consultant and retail executive, founded this company. The product is modeled after a device that Brighton had seen used by campers. She views this company and this product as a way of having some fun and making some money. Because of her attitude, there is minimal pressure to be profitable. The immediate goal of the company is to break even. This is helpful, especially with a small start up company. It will allow the organization to move on with a lower expected profit margin than most.
This is a good time for Alma Products to be developing such a product. Although the number of charcoal barbecuing households has decreased, the sale of charcoal has increased. This means that the consumers who are charcoal barbecuing are doing so more frequently, and are more dedicated to this method. In addition there is only one other similar product available on the market and it has an extremely limited distribution.
Alma Products has developed a relationship with a broker agency, Davis ; Davis, who will handle all of the selling. This is a strategic move by Brighton in order to lower her costs and take advantage of the contacts already established by the brokers. Davis ; Davis will charge a 10% commission on all retail sales, and opposed to the numerous costs associated with an internal sales force. In addition, Davis ; Davis have other clients that are manufacturers of barbecue grills and other summer seasonal products. This will be helpful in getting Easy Embers distributed.
Alma Products has also developed a relationship with Santa Fe Engineering, who will manufacture the product and ship it directly to retailers. This arrangement will be beneficial, as there will be no need for warehousing products, and the costs are reasonable.
Easy Embers faces its largest competition from sales of lighter fluid. Lighter fluid is a cheap method of starting barbecue fires, and one bottle offers numerous uses. This is the most common means of lighting charcoal and it may be difficult to get consumers to switch to a new method. Alma Products will need to rely on its contacts through its broker to get Easy Embers into prominent retailers in California. They will also need to focus on the positive aspects that their product has as an alternative to lighter fluid – cleaner, faster, safer, etc. Alma Products will need to zero in on a core target market of frequent charcoal barbecuers. They can use information from their brokers, retailers, and industry publications to facilitate this effort.
Our financial analysis shows that Alma Products should have minimal difficulty breaking even. Because our analysis was extremely conservative, it is more likely that they will be profitable. They should utilize some of these profits for promotion either through direct mail or retail displays. Alma Products will have a successful first year selling Easy Embers, and should reevaluate their business goals in the future. Although Easy Embers is currently a unique product being marketed this year, it is likely that other manufacturers will join in once Alma is successful. They will then have to decide to continue doing business as usual, to expand, or to join forces with a larger manufacturer.