Case
Teaching Notes
Supplementary Resources
Abstract
MBA students Tim Joyce and Brandon Cornuke had what they believed was a great product concept: a body powder that could be delivered in an aerosol spray. Current market-leading powders such as Gold Bond and Johnson's Baby Powder involved messy application, as they were only available in “dump-on” form. Worse, because powders deposited on top of the skin didn't adhere to it, they tended not to last long. Joyce and Cornuke believed an aerosol powder spray would solve these problems. They called their product concept Dry Goods. However, taking Dry Goods from idea to reality presented some serious challenges. How would two students without access to a lab be able to research and develop a complex chemical/physical process like aerosol delivery, let alone manufacture it once they had a proven prototype? To address these problems, the two entrepreneurs sought out a contract manufacturing partner. After identifying a number of options, Joyce and Cornuke had to decide which partner offered them the best chances of success, given their goals and financial constraints.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Diagram of Aerosol Components
Exhibit 2: Dry Goods Unit Economics
Estimated retail price per unit | $10.99 |
Target retailer margin | 45% a |
Cost of goods sold per unit | Unknown |
Distribution costs per unit | $0.78 b |
Returns and breakage | 2% of wholesale price c |
a. Joyce and Cornuke would sell to retailers at wholesale prices; the two had learned that retailers usually expect to earn 40 to 50 percent margins on personal care products like Dry Goods.
b. Distribution costs included warehousing the product and shipping it to retailers. At scale, this number would drop to $0.53.
c. Estimating returns and breakage at 2 percent of wholesale was industry standard.
Exhibit 3: Offers to Manufacture Dry Goods
Co-Packer | Location | Price/Unit | Minimum Order (Units) | Lead Time | Defect Rate | R&D Fee |
AeroMaster | Philadelphia | $1.79 | 60,000 | 12 weeks | 2.00% | $20,000 |
King | Chicago | $1.48 | 100,000 | 8 weeks | 0.02% | $40,000 |
CSC | Chicago | $1.58 | 20,000 | 12 weeks | 2.00% | n/a |
Yangtze | China | $1.17 | 45,000 | 10 weeks | <1.00% | n/a |
Exhibit 4: Unit Price by Volume of Dry Goods Produced (in U.S. dollars)
Order Volume | AeroMaster | King | CSC | Yangtze |
20,000 | n/a | n/a | 1.58 | n/a |
40,000 | n/a | n/a | 1.56 | n/a |
60,000 | 1.79 | n/a | 1.55 | 1.17 |
80,000 | 1.77 | n/a | 1.53 | 1.16 |
100,000 | 1.75 | 1.48 | 1.52 | 1.16 |
120,000 | 1.74 | 1.47 | 1.50 | 1.15 |
140,000 | 1.72 | 1.47 | 1.49 | 1.15 |
160,000 | 1.70 | 1.46 | 1.47 | 1.14 |
180,000 | 1.69 | 1.45 | 1.46 | 1.14 |
200,000 | 1.67 | 1.44 | 1.44 | 1.13 |
225,000 | 1.66 | 1.44 | 1.44 | 1.12 |
250,000 | 1.65 | 1.43 | 1.43 | 1.12 |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved