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6/25/2018

Sweet Leaf Bath Co. Marketing Proposal BU362-B6 Group 9

Dong-Meng Ding, Andrew Gordon, Tanner Matthews, Amit Rapoport, Thayadora Williams

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Contents Executive Summary....................................................................................................................................... 2 Nature of the Business .................................................................................................................................. 3 Problem Statement ....................................................................................................................................... 3 Decision Criteria ............................................................................................................................................ 3 Internal Analysis............................................................................................................................................ 4 External Analysis ........................................................................................................................................... 4 Consumers .................................................................................................................................................... 6 Distribution Channel Financials .................................................................................................................... 7 Promotion Option Financials ........................................................................................................................ 8 Alternative 1.................................................................................................................................................. 9 Alternative 2................................................................................................................................................ 10 Alternative 3................................................................................................................................................ 11 Implementation .......................................................................................................................................... 13 Exhibits ........................................................................................................................................................ 15 Bibliography ............................................................................................................................................... 29

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Executive Summary Sweet Leaf is a natural and organic personal care Startup with one full-time co-founder and one part-time co-founder. They want to get Stacey, the founder working part-time, back to working full time, which they can only do with a dramatic increase in sales up to $150,00 $200,000. They must do this with a small advertising budget of $5,000. Sweet Leaf has several competitors currently in the market place such as Delapointe, Tashodi, and L’Herbier. In the future, being Fairtrade certified may not be enough as other companies adapt to the increasingly ethical and green conscious society. Their target consumer segment focuses around women between the age of 25-50, who are knowledgeable about Fairtrade products. Our first alternative was focused around the Canadian distributor, Purity Life. This distributor could get Sweet Leaf into large retailers which will drive sales for the company. With this, we would also add in a website redesign for retailers to be able to check the site for more information. Our second alternative is based on the entire company going green and getting a green certification. They will also use a 100% compostable packaging for all products to add to their going green plan. Finally, the last alternative and recommendation we decided to pursue a multi-faceted strategy which involves a 3-year plan to reach their financial goals. It will include a redesign of the website and getting on Etsy for distribution in the first year. In the second year the CHFA vendor show will be another distribution strategy used to drive brand awareness, which will be backed up with our increase in sales through Etsy and redesigned website. To further differentiate Sweet Leaf from competitors and stay ahead of the trend, a dedication to donate 5% of all sales to Covenant House is proposed. A public relations consultant will be hired to drive awareness of this new initiative. The final alternative meets all decision criteria of adding a competitive advantage, sticking with budget constraints, and making sure Stacey can return to work full time.

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Nature of the Business The industry in which Sweet Leaf Bath Co. operates is the Natural and Organic personal care industry. Currently Sweet Leaf`s product mix includes soaps, soaks, scrubs, lip balms, and butters. Their core product offering is an ethically conscious lifestyle, while their actual products are the goods mentioned, and currently they do not have an augmented aspect to their product.

Problem Statement Rose Creamer and Stacey Guymer of Sweet Leaf Bath Co. have seen minimal sales growth within their first 3 years of operation. As a result, Stacey had to take on a full time job in order to support her family and can only work for Sweet Leaf part time. In order for her to come back full time, Sweet Leaf must generate sales between $150,000 and $200,000, but without a unique competitive advantage, and current sales of approximately $25,000 this seems like a daunting task for the two women team working out of their basement. The two founders must figure out a distribution and promotional strategy that will allow Stacey to return to the company full time, while creating a sustainable revenue stream for the future.

Decision Criteria To create a distribution and promotional strategy that will be successful, the below alternatives must be evaluated off the following decision criteria. Does the strategy create a unique competitive advantage for Sweet Leaf that will allow them to differentiate themselves within the marketplace? Will this alternative be sensitive to the $5,000 advertising budget as well as financial constraints in which the company is facing? Finally, will the strategy allow Stacey to return to the company with the confidence that revenues generated will be enough for her to draw a sufficient income to support her family?

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Internal Analysis The main strengths that the company currently has to work with is the fact that they produce high quality products that are environmentally friendly, ethically sourced, and have most of their products certified by Fairtrade Canada. This is an advantage as there is only one other producer in Ontario and eight in Canada who have their products certified as Fairtrade. Sweet Leaf`s weaknesses is their lack of financial resources, brand awareness, and distribution. They only have $5,000 to spend on advertising and only made $3,449 in profits last year. Since Sweet Leaf Bath is a small company, they do not have large brand recognition compared to their competitors. They do not have good distribution as they only sell in 20 retailers, and their website only had an annual traffic of approx. 4,300 visits.

External Analysis Their main opportunity was that people were leaning towards an ethical movement in their products, and cared a great deal about Fairtrade products. There is a growing need for having Fairtrade products and sales of Fairtrade products increased by 3% from 2008-2011. There are other issues regarded as more important than Fairtrade in today’s society such as child welfare, health issues, and homelessness, which Sweet Leaf can target. In 2012, another opportunity is the increasing use of technology and social media. This could be drastically leveraged as the advertising costs to promote online is cheaper than others. The threats would also be centred around the increasing awareness, as there are many other competitors in this industry, with a much larger brand recognition. Many people also perceive companies as “green washing” which means that they are using PR to falsely promote their company as being green, even though it is not. Sweet Leaf’s main competition lies within their regional competitors,who have seen success in Eastern Canada. For example, Tashodi is sold in places like Winners, Chapters, and

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Planet Organic, which are all popular retailers, and also were featured in various magazines which gave them global recognition. Tashodi’s products are sold through over 50 stores in Canada and the US, as well as online through their professionally done website, however it is important to note that none of their products that are carried in retail stores are Fairtrade certified. Delapointe has a social aspect to their business where they strive to improve the quality of life for 3,000 women. Delapointe also has a diverse product mix including, soaps, lip balms, face and body balms, a therapeutic balm, as well as gift baskets. Delapointe’s products are priced at a much higher price based on the size of their products but, due to their consumer awareness and certifications, are still able to successfully sell products. Being the only Fairtrade importer of shea butter gives Delapointe a large competitive advantage, but their high prices give Sweet Leaf an opportunity to undercut them in the marketplace with products of similar quality. L’Herbier is offered in over 100 spas that constantly use their products and offer bulk options for healthcare centres as well. Kynk Nautrals and Earth to Body are another two competitors for Sweat Leaf. Neither of these companies are Fairtrade certified, or mentioned using Fairtrade products. Pricing of both of these companies tend to run inline/slightly above that of Sweet Leaf’s when comparing on a per ounce basis. Earth to Body’s competitive advantage lies in their referral point system and online presence while Kynk Naturals is mostly derived from their online presence. Sweet Life has a great opportunity to combat both of these competitors on both price and quality. (refer to Exhibit 7 for a perceptual map).

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Consumers Sweet Leaf Bath currently focuses on one main customer segment: The Mature Customer. The majority of these women live in larger cities, are married, and 44 percent of them have one or two children under the age of 18. This means that they are not only shopping for themselves, but for their children and husbands as well. These customers want higher quality products for their families and are also buying higher quantities than individuals. 54% of them come from high income households, which means that they can afford higher priced Fairtrade soaps. They make 25% of their purchases at organic food stores, this means that their other shopping needs are aligned with what Sweet Leaf is offering. The women participate in a range of traditional and social media with radio news being the highest media outlet with 30 percent of the women listening daily. Sweet Leaf is currently positioned based on product attributes. They are a high quality competitively priced Fairtrade personal care product manufacturer. Sweet Leaf currently offers a convivence good as its products are low and for personal care. The prices of the products are $6.75 for soap bars, $5.50 for lip balm, $20.95 for body butter, and $17.95 for body scrub. Sweet Leaf has 4 main distribution networks that it uses to sell its products. They sell online through their website, directly to close friends and co-workers, through 20 retail locations and through attending vender shows. Sweet Leaf promotes itself in 2 main ways, through sponsoring mommy bloggers and talking with customers and retailers at trade shows. Sweet leaf sends free products to mommy bloggers in exchange for being a featured story on their blogs. Trade shows are a great way for Sweet Leaf to market itself and make connections with retailers as they convinced 4 retailers to carry their products in 2011.

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Distribution Channel Financials Etsy is an e-commerce website that connects sellers of handmade or vintage goods to buyers and has 6.8 – 8.4 million unique visitors a year. To list Sweet Leaf’s 22 products for a year, it would cost $13.20. The main fees are charged during transactions, in which Etsy gets $0.20 plus 3.5% of the sales price of each transaction. Etsy pages get anywhere from 100-1200 daily website views (Capps, 2014). Since Sweet Leaf would be new to Etsy, it is conservatively estimated the Sweet Leaf would get 100 page views per day. The conversion rate for Etsy is estimated to be in the range of its conversion rate for the Facebook cost-per-click campaign and its website conversion rate, which are 1% and 2.3% respectively. Depending on the conversion rate, the projected profit from Etsy alone can range from $13,806 to $31,679 (see Exhibit 1 for more details). Pristine Planet is a green-certified products search and comparison engine that gets 52,800 - 171,600 unique visitors per year. There are no transaction fees, only a membership fee that costs $50 for the first two months and $50 per month afterwards to list up to 100 products. For Pristine Planet to be more profitable than Etsy, it would need at least 56 daily page views. Given that Pristine Planet is approximately 70 times smaller than Etsy if measured by unique visitors, it is not likely that Pristine Planet can garner more than 56 daily views if on Etsy it would receive 100 daily views (see Exhibit 2 for more details). Purity Life is a distributor of health products in Canada with connections to 30 retailers including major retailers like Whole Foods and Goodness Me. Assuming one major retailer agrees to stock Sweet Leaf products, fixed costs would amount to $3100. Retailers would demand a 32% margin on wholesale and a 10% discount on the wholesale price in the first month. Sweet Leaf would need to get into at least 25 to 58 additional retail locations to be as profitable as the Etsy platform, depending on Etsy’s conversion rate. With Sweet Leaf’s current

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brand image and limited sales, it is uncertain if major retailers would stock its product (see Exhibit 3 for more details). The Canadian Health Food Association (CHFA) is Canada’s largest trade association dedicated to healthy and organic products. They host an annual trade show where consumers and industry participants will network and view products. In 2011, Sweet Leaf had average vendor show sales of $552.55 with a gross margin of 69%. It would cost a total of $3200 to participate in the trade show, so the estimated profit from the trade show is -$2,818.74. Despite a negative profit at the trade show, the relationships built will lead to future sales and business opportunities (see Exhibit 4 for more details).

Promotion Option Financials To hire a public relations consultant to create print and an online presence, drive traffic and sales to website would cost $830. Since the partners are considering hiring at least two, this is a potential total cost of $1,660 (Refer to Exhibit 8). To do a website redesign, there is a one-time fixed cost of $3500 which will provide the company with online professionalism, a smoother and improved checkout system and search engine optimization. Additionally, analytics available with a website redesign will enable Sweet Leaf to see what content, calls-to-action and pages drive conversion. The Facebook ad campaign exposes an ad to a targeted group. The Facebook ad campaign has two models, a cost-per-click (CPC) or a cost-per-thousand-impressions (CPM). Even with an optimistic assumption on campaign cost, contribution is still negative for the CPC model (see Exhibit 9). The CPM model provides a positive contribution with a pessimistic assumption that the bid range is 0.78 (Refer to Exhibit 10), making this sensible.

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Google Adwords is similar to a Facebook ad campaign in that the partners need to decide what to promote, what keywords to choose and a budget. Google Adwords was assessed using the same CPC and CPM conversion rates as the Facebook ad campaign, the middle values of the ranges provided regarding views and clicks, and the average sale of $65 (Refer to Exhibit 13). This model has a negative contribution even if an optimistic assumption is used for the number of views and clicks. Point of sale displays provide retailers with a physical case to draw attention to the product line. The cost of this is $44 per retailer with a minimum order of 25 units. Displays would be of the soap and lip balm line, the two highest selling products. Positive contribution was calculated for point of sale displays for both product lines (see Exhibit 16). A benefit to this option, is that it is scalable. There are long-term intangible benefits of running promotional campaigns that contribute to brand awareness that should be considered. The daily deal site promotion entails websites that feature products and services offered at deep discounts, such as Groupon. The cost to participate in this promotion is to offer a discount of 50-70% as well as pay a fee of 50% of the discounted price to the website. This means that Sweet Leaf would receive a maximum of 25% of the retail price of their products. Posting on daily deal site websites can hinder brand image, is enough to rule out this option.

Alternative 1 For our first alternative we have decided to go straight to working with a distributor to get Sweet Leaf’s products into brick and mortar stores. In this alternative they would be partnering up with Purity Life, a company that distributes different health products to health food stores and grocery stores. Having a distributor who can reach large chains such as Whole Foods would be extremely beneficial, especially since on its own, Sweet Leaf was not able to get into these large

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grocery stores. Additionally, reaching these large stores would help with brand awareness as they would generate more exposure in the marketplace. The issues with this alternative is that Sweet Leaf must get into a large number of retail stores to make this option worth the large costs including giving purity life a wholesale margin of 32% along with all the incentives, advertising, and other costs. As Sweet Leaf is a small company with little brand recognition or qualifications, it is unlikely to impress a sufficient number of retailers. This recommendation would not meet the requirement of $150,000 in sales and does not improve upon Sweet Leaf’s current advantage of Fairtrade products.

Alternative 2 As our second alternative we have decided to get certified by the Institute for Green Business. Being certified as a green company would increase our popularity with our target market as they also care about green products and would give us another advantage over our competition. The standards that need to be achieved in order to get certified are as follows: “1. Comply with all environmental regulations applicable to your business. 2.Implement a variety of measures to save energy, water and other materials, as well as reducing waste. 3. Allow site visits to verify that your business meets the above two steps. 4. Pledge to continue these terrific efforts to prevent pollution and conserve resources, including environmental compliance (IGBC Institute For Green Business Certification). From past experience with eco friendly packaging, we also believe that Sweet Leaf should create 100% post-consumer waste compostable packaging. Currently this eco friendly packaging is only used for the lip balms, but could be transitioned to all products. It is stated that consumers who are interested in Fairtrade are also interested in environmentally friendly packaging and organic ingredients. The improvement in economic conditions suggested that the desire for green products would grow in 2012 and that

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40% of people did not purchase green products because of financial reasons, therefore a better market would allow those people to make their desired purchase.

Alternative 3 The third and final alternative is ...