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BCG Easy Profitability

Slippery Soap

#Consumer Goods #Personal Care
ProHub Comment

This is a straightforward profitability case designed to test a candidate's ability to break down financial statements and identify that revenue growth (up 25%) masked by disproportionate cost increases (up 50%) is eroding margins. The case cleverly reveals that the new products (Instagram-trending shampoo and made-to-order bath bombs) are driving revenue but with unfavorable unit economics, particularly the labor-intensive bath bomb business.

Estimated Time 15 minutes
Difficulty Easy
Source Wharton
50 / 100
The $200 Mn personal care department of a US-based pharmacy client has not reported any profit growth over the last few years. The department consists of two main business lines: 1) creams and lotions (lotions, skin creams, etc.) and 2) bath products (soaps, shampoos, etc.) We have been asked to help the client understand why their profits are not growing and what they need to do to turn things around

Clarifying Information

● Objective - The objective of the client is to understand why the profits are not growing and how the profitability can be turned around ● Business - While creams and lotions industry has remained flat, bath products category has seen 10% market growth due to growing focus on hygiene. The client introduced two new products in last two years (1) a viral Instagram-trending shampoo and (2) “made to order” custom herbal bath bombs – both products have been a boost to bath & body revenue. ● Competition - There is competition from personal care departments of other pharmacies, supermarkets, e-retailers, etc. and “upscale” retailers like Sephora, Ulta, Lush, etc. ● Product - For the “Made to order” bath bombs, one employee makes custom blends for customers for 8 hours (one shift) a day. A bath bomb is a single-use, spherical blend of fragrant oils and extracts that you can toss in your tub.