This case requires candidates to move beyond direct profitability calculations to understand the strategic value of WIC contracts. The key insight is that while direct WIC sales may appear unprofitable in isolation, the shelf-space access and market-share benefits create substantial synergistic value that justifies the bid. The case tests whether candidates can identify hidden revenue streams and think systemically about customer lifetime value.
The client is a manufacturer and distributor of infant formula. They sell their product nationwide, and are in the middle of the pack in terms of market share. They are currently trying to boost their market share while maintaining profitability.
There is a government welfare program called WIC (Women, Infants, Children) that allows individuals living below the poverty level to receive vouchers for infant formula for their children. Unlike most welfare programs, this one is subsidized by the actual producers of infant formula. On a state-by-state basis, infant formula producers bid for the right to be the sole supplier of infant formula to welfare recipients in that state.
In addition to paying the government for the WIC contract, the client also provides rebates to retailers for WIC sales. As a result, income received from WIC sales is substantially less than that received from normal formula sales. In fact, sales to mothers that remain in the WIC program for more than 12 months result in a net loss.
In trying to determine how much to bid on a WIC contract for a given state, what factors should you consider?