This is a structured product launch and pricing case that requires candidates to balance profitability with sustainability benefits. The case tests the ability to size markets, calculate value-based pricing, and incorporate externalities (carbon credits) into financial models, distinguishing good candidates from outstanding ones through their ability to monetize environmental benefits.
Your client is ChemCo, a global manufacturer of Chemical specialties based in the UK with profits of approximately $200M. Although Petrochemical solvents are necessary in paint formulators, they are a source of CO2 emissions, represent a safety hazard (they are flammable) and, also, a health hazard to operators and painters.
ChemCo has recently developed an innovative chemical ingredient that paint manufacturers can include in their formulations allowing them to eliminate all Petrochemical solvents from their formulation and replace them with water. Chemco’s CEO has hired you to understand whether it is a good idea to proceed on commercializing the product.