Demand Analysis Problem

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DEMAND ANALYSIS PROBLEM

Larson is trying to estimate the market potential for Stacy's Pita Chips. She knows that there are 150 million snack food consumers in the U.S. market. Of these consumers, around 20% are heavy snackers, 50% are moderate snackers, and 30% are light snackers. Market research shows Larson that heavy snackers purchase 21 bags of snacks annually, moderate snackers purchase 8 bags of snacks annually, and light snackers purchase 3 bags of snacks annually, on average. Heavy snackers were very price sensitive and waited for sales or used coupons so that they paid only $1.99 for a bag of snacks. Light snackers were price insensitive and usually paid full price, $4.99, for a bag of snacks. Moderate snackers sometimes bought on sale, but sometimes paid full price, so they paid $3.49 for a bag of snacks. Currently, only 20 million snack food consumers purchased pita chips for their snacks. Of these, 6 million were heavy users, 13 million were moderate users, and 1 million were light users. Three firms currently competed aggressively in the pita chip segment: Stacy's, which had 10 million consumers who purchased 90 million units; Lay's, which had 6 million consumers who purchased 63 million units, and Kirkland, which had 4 million consumers who purchased 80 million units. In 2008, Stacy's sales were $429 million; Lay's sales were $125 million; and Kirkland's sales were $75 million. Q1: How big is the potential market (in consumers, units, and dollars) for salty snacks? What is the market penetration of pita chips? Based on these answers, how much growth potential is there for a company like Stacy's? The potential market for salty snacks is 150 million consumers. About 30 million are heavy snackers, 75 million are moderate snackers and 45 million are light snackers. Potential market in units per segment:

Heavy users:

21 bags * 30 million users= 630 million bags purchased by heavy users annually.

Moderate users:

8 bags * 75 million users = 600 million bags purchased by moderate users annually.

Light users:

3 bags * 45 million users = 135 million bags purchased by light users annually.

We are speaking about a potential market of 1.365 million units annually.

Potential market in dollars per segment:

Heavy users:

630 million bags * $1.99 = $1.253,7 million payed by heavy snackers annually.

Moderate users:

600 million bags * $3.49 = $2.094 million payed by moderate snackers annually.

Light users:

135 million bags * $4.99 = $673 million payed by light snackers annually.

The weight in dollars of the market is $4.021,35 million.
Consdering that only 20 million snack food consumers purchased pita chips for their snacks and that the potential market is 150 million consumers, the market penetration index is about 13%. [pic]
In front of these results we can affirm that many potential customers are not currently buying the product. There are still 130 million more potential consumers for pita chips so there are opportunities to grow the market demand. Q2: What is the market penetration of pita chips in the three target markets? Which one offers the most untapped potential for Stacy's? The potential market in the U.S. for Stacy’s pita chips is 150 million consumers.

Currently, the company has reached 20 million consumers of the potential consumers. If we split this 20 million customers in segments, 6 million are heavy snackers, 13 moderate snackers and 1 million belongs to light snackers.

The penetration index per segment would be the customers already reached in each segment divided per the potential market.

Penetration index per segment:

Heavy users:

[pic]

Moderate users:

[pic]

Light users:

[pic]

The segment that remains more unexplored for Stacy’s pita chips is the light users segment. As seen in the penetration index analysis, light users segment has the lowest penetration index of all three. That means that Stacy’s pita chips has attracted few...
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