Hydrocan Case

HydroCan would like to introduce to the market new, innovative, generating savings, the new generation of fertilizer StaGreen. They need to set up their marketing policy.

Total market which they are about to enter is $322 400 000. There are already known fertilizer’s producers, but – as research showed – ~40% of client do not care which brand of fertilizer they use. Store’s market share is divided between: discount stores – 60%, specialty stores – 30% and home improvement stores – 10%. Conclusion is that customers not familiar with any brand spend $77 376 000 in discount stores, specialty stores – $38 688 000 and in home improvement stores – $12 896 000.

Market is sessional – it should be taken also into the consideration, - this would determine when marketing campaign should start etc.

HydroCan would like to set up the retail price at $22,5. Also, they consider selling the StaGreen directly to small and large stores or indirect - via wholesalers. Calculation shows that the best solution would be direct sell to large stores (for the breakeven point they should sell 443324 units, what is only 3,09% of total market). Situation in indirect channel is different: if they will focus on small stores, the breakeven point would be 3 137 368 units, what is 21,90%! For this channel also gross margin would be low – only 5,88%.

I think that HydroCan should consider changing the retail price; comparable product (Miracle-Gro) price is $12,95 for 2,5kg what makes the $51,8 for 10 kg. One of the idea would be changing both: the packaging to smaller one – e.g. 5 kg with the retail price of $20,99.

Distribution channels – in my opinion HydroCan should cooperate directly with large discount stores and home improvement stores. Discount stores have 60% of the market share. It means that in this stores customers spend over $193 M, and among them there is 40% of “never mind the brand” customers spending over $77 M per year on fertilizer. If HydroCan would convince 12,98% of them – breakeven point will be achieved.