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Medium Profitability

CraftCo

#Consumer Goods #Retail #Technology

Practice this intermediate profitability case interview question from EY in the Consumer Goods sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This profitability case tests the candidate's ability to build financial models from limited data, analyze market dynamics, and develop multi-faceted strategies. The case emphasizes the importance of understanding both revenue and cost drivers in subscription models, while Exhibits B and C highlight the critical need to diagnose root causes of business decline before recommending solutions.

Estimated Time 26 minutes
Difficulty Medium
Source Wharton
33 / 100
Our client, Craft Co., is a subscription service that will send customers kits for adult crafting and DIY projects (e.g., watercolor painting, woodworking). Customers pay a monthly fee based on the number of kits they would like, Craft Co. sends them a box with craft supplies. Craft Co. had grown its customer base rapidly during the COVID-19 pandemic, but has seen a dip in recent quarters as new competitors have entered the field. Our client would like our help in answering two questions (i) how has Craft Co. performed recently? and (ii) what strategies can it implement to grow profitability and increase share?

Clarifying Information

  1. Craft Co’s products are typically marketed towards young adults ages 18-35
  2. It was seen as the first major player in this market, but new competitors began to enter by the end of 2020
  3. There is no specific ROI or objective that our client is aiming to achieve related to this analysis, but they are most interested in short-term strategies in the next 1-3 years as opposed to longer-term opportunities
  4. Craft Co. is currently focused solely on the U.S. market
Mock Interview
Interviewer

Our client, Craft Co., is a subscription service that will send customers kits for adult crafting and DIY projects (e.g., watercolor painting, woodworking). Customers pay a monthly fee based on the number of kits they would like, Craft Co. sends them a box with craft supplies. Craft Co. had grown its customer base rapidly during the COVID-19 pandemic, but has seen a dip in recent quarters as new competitors have entered the field. Our client would like our help in answering two questions (i) how has Craft Co. performed recently? and (ii) what strategies can it implement to grow profitability and increase share?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

CraftCo is a struggling subscription crafting service facing subscriber decline despite pandemic tailwinds and competitive entry. Candidates must estimate profitability, brainstorm growth strategies, interpret subscriber trend data, assess competitive positioning, and recommend stabilization tactics—all within a 1-3 year timeframe.

Key Insights:

  1. Subscription models require careful tracking of both customer acquisition costs and lifetime value—fixed costs (marketing, operations) create significant fixed leverage
  2. Market leadership is fragile; first-mover advantage can evaporate quickly with competitor entry and changing consumer preferences post-pandemic
  3. Diagnosing decline requires separating market-wide headwinds from company-specific weaknesses; Exhibit C reveals CraftCo excels on price and quality but fails on delivery and convenience—a gap competitors are exploiting
  4. Pricing power exists for perceived high-quality offerings; the case hints that CraftCo may have underpriced relative to premium competitors, suggesting opportunity to raise prices to restore margins
  5. Short-term stabilization (delivery, product simplification, loyalty) must run parallel to longer-term differentiation and potential M&A to combat competitive threats

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