Explanations to the financial analysis:

 

· Market segment volume Muesli+other high fibre cereals (in 1995): » 220,000 tonnes

Þ annual growth 8% (1995,1996,1997)Þ volume in 1998 (=220,000*1,083) : » 280,000 tonnes

Þ 2% share of 280,000 t =5,600 tonnes Þ 1st year production volume: » 6,000 tonnes !

 

· Year 1 : share of 2%

Market size Muesli and other high fibre = 280,000 tonnes Þ our share 2%= 5,600 t

Production 6,000 tonnes= 16 million Boxes (à 375g) * Øprice of £1.4 = £22,4 million turnover

· Year 2 : share of 3 %

Market growth 8% p.a. Þ 302400 tonnes Þ our share 3% = 9,072 t

Production volume 9,500 tonnes = 25,5 million boxes = £ 35,5 million turnover

Year 3: share of 4 %

Market growth 8% Þ 326,600 tonnes Þ our share 4% = 13,064 t

Production volume 13,500 t = 36 million boxes = £ 54 million turnover

 

Further declerations of table:

· costs of goods sold = 0.4 % of sales turnover covers costs from package, labour, ingredients.

· R&D costs = a)costs of researching, development, testing the product = £ 0,70 million

b)marketing research costs (customer asking, concept test etc.) = £ 0,50 million

c)manufacturing development ( new machines etc.) = £ 0,04 million

= £ 1,3 million

· Marketing costs = (sales promotion, advertising, salesforce)

· allocated overheads = all overheads calculated to the new product

· discounted contribution = 15 %

Here the net cash flow is discounted to the present using a minimal rate of interest (minimal

acceptable return).

· cumulative contribution = the sum of all contributions over 3 years (in this case).

 

· cash flow is calculated as follows: (allocated overheads + marketing costs)/(price * (variable costs))

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