By: Josh Resnick & Kirk Wegner
March 6, 2009
Introduction to Allstar Brand
Allstar Brand is a United States based consumer products company that produces and sells ethical (prescription) pharmaceuticals, OTC (over-the-counter or nonprescription) drugs, and consumer products. It is an $8.9 billion firm that was formed in 1924 and competes with a variety of larger and smaller firms, depending on the product market. It has a number of leading brands in various product categories. Over the years, it has expanded its product category width through internal new product development and acquisition of brands as well as companies. Allstar has operations in Europe and alliances in Asia. These have proven to be very successful markets that performing exceedingly well. But these markets are maturing very quickly, and with increased competition and slowing populations, it is now necessary to look elsewhere for continued growth and profit margins. The Allstar Board believes that to generate the kind of growth needed to drive their stock price, Allstar needs to develop a market presence in South America. South America is a region of great potential. With a population of approximately 450 million, the region represents a population that is 50 percent larger than that of the United States and Canada. The dominant national language across South America is Spanish, as is the case with Argentina. A variety of trade enhancement actions have put in place in recent years. The MERCOSUR agreement was set up among the South American countries of Argentina, Brazil, Chile, Paraguay, and Uruguay, including association agreements (but not membership) with Bolivia. This agreement reduces trade barriers among these countries and has encouraged a variety of companies to establish production inside their borders to take advantage of low labor costs and fairly seamless access to neighboring markets. For accounting purposes at Allstar’s corporate offices, revenues and costs are converted into US$. Therefore, fluctuations in the exchange rate will affect consolidated reports directly.
Allsmile, a toothpaste brand, is a key asset of Allstar Brands. It is one of the company’s highest recognition brands in the United States. It is produced in the United States and in Germany for the United States and European markets, respectively. A large number of stock keeping units (SKUs) are produced. South Korean and Japanese manufacturers also produce Allsmile under license for distribution and sales in Asia. There have been reformulations of the brand, but as of today, the product formulations are essentially the same across all markets for a given SKU (although there are slight differences in packaging and in the type and intensity of flavoring that are thought to reflect regional preferences). With an entrance to South America, it may end up being cost effective to build a plant in South America instead of shipping products from the United States. Current world toothpaste sales total approximately $10 billion. The largest country market for toothpaste is the United States, with $1.4 billion spent during the past year. Toothpaste is available in a number of sizes, delivery systems, textures (paste or gel), and formulations. The basic toothpaste product is a paste or gel with flavoring and one or more active ingredients that provide specific benefits to consumers. A general description of these variations in the United States market is listed below. It is important to note that not all companies produce all possible combinations as each company determines where the holes in the market are and where the most money can be made.
Toothpaste Packaging and Formulation Variations
Sizes (grams) | Delivery Systems | Texture | Formulations (Ingredient/Benefit) | Travel (25) Personal (75)Family (150) | Tube Pump | Paste Gel | Basic uses fluoride for prevention of dental cavities....