Dr. Johns Products Case Slides By: Anthony Haddad, Gerard Sansosti, - - PowerPoint PPT Presentation

• Dr. John’s Products Case

Slides

By: Anthony Haddad, Gerard Sansosti, and Kaili Simien

By submitting this deck of case slides, the members of this team affirm that we all participated in the analysis of the case and the creation of this document.

Qualitative Analysis

Customer Value Proposition

• Low cost electronic toothbrush alternative
• New design: part of the head remains still to mimic

the feel of a normal toothbrush while other part spins to provide superior cleaning power → best of both worlds

• The transparent packaging allows for the buyer to

view the product before purchasing

• Runs on only two AA batteries for three months of

use Go-to-Market Strategy

• Priced much lower than competitors
• Direct distribution through large retailers facilitated by

Osher’s successful previous ventures.

• Guerilla marketing - handing out free toothbrushes to

have people experience the product and gain word of mouth publicity.

• Building relationship with chain drug stores by

showcasing product at NACDS trade show

• Patent protected design and packaging provides some

protection from competitors Technology and Operations Management

• Collaborated with reliable Chinese manufacturing

partner which Osher has worked with in the past

• Osher partnered with and employed a limited

number of highly successful and usually

• verqualified people
• Logistics outsourced as much as possible
• Hired former Clorox executive as Head of Sales,

significantly improving relationships in retail Profit Formula

• Electric toothbrush market expected to increase rapidly

in the US and abroad

• Attractive and growth sustainable profit margins
• Potential partnership with Crest to gain brand

awareness and compete with other powerful consumer product companies

• Extremely competitive price - almost nine times less

expensive than similar products

Quantitative Analysis

Retail Market Value: 4th Quarter 1999 Total market size for dental accessory and power toothbrush industry: $74,700,000.00

• Dr. John’s retail market value: 0.6% * $74,700,000.00 = $448,200.00

2000: Average quarterly growth rate (7.28%) -> $1,923,226.20 75% of Average quarterly growth rate (5.46%) -> $1,890,619.65 50% of Average quarterly growth rate (3.64%) -> $1,858,013.10 Braun

• Dr. John’s

Difference Price of Brush $50.00

• # of Brushes/Year

1 4 Price of Replacement $6.00

• # of

Replacements/Year 3

• Total Cost

$68.00

• $68.00

Value In Use $17.00 Value In Use Calculation in Comparison to Braun’s Electric Toothbrush

• Dr. John’s is underpricing it’s

product according to the economic value in use calculated in the figure to the

• right. Dr. John’s is currently

priced at $5.50, when it could be priced at $17.00. Note: The table to the right uses the toothbrush value of $50; however, it should be noted that some toothbrushes are priced well over this amount.

Recommendation

1.

• Dr. John’s Products should pursue a sale to one of the major consumer goods companies

a. Comparable consumer goods companies are trading at P/Sales multiples of 4.18x on average as of Year End 1999 i. Using the same multiple for Dr. John’s (which is highly conservative given that the larger companies’ multiples include much lower margin products and Dr. John’s sustainable high growth rates) implies a valuation of $50.39mm for the company ii. Companies typically pay a premium for acquisitions, and adding Dr. John’s SpinBrush to the product

• ffering of any of these companies should lead to significant cost savings in R&D, meaning that a purchase

price well in excess of $50mm is very reasonable b. With Crest lacking any electric toothbrush in their product line, they are an ideal strategic partner i. Osher should also approach other companies that are in need of a strong electric toothbrush, in the hopes of starting an industry bidding war that will increase Dr. John’s valuation c.

• Dr. John’s has created an innovative product, but lacks a logical direction in which to grow the brand into a large

and diverse product line i. It is therefore most prudent to capitalize on the value of the SpinBrush before the large industry players invent comparable products which will reduce Dr. John’s leverage d. Osher does not have a desire to build an employee-heavy company, which would be a necessity if he chooses to grow Dr. John’s into a consumer goods industry player e. Osher highlights having an exit plan as one of the most vital tenants of entrepreneurship i. He has been in contact with larger consumer companies throughout the life of Dr. John’s, which implies that he believed the company was destined for acquisition from the start