effect WORKSHOP

PROFIT CONCEPT: GROSS MARGIN AND MARKUP effect WORKSHOP Both concepts relate to the profit of a product or entire transaction (sale of many products) when the cost is subtracted from the price or revenue (=sales) Note definitions: - Sales = Revenue = Quantity (no.of pieces) x Price (per piece) - Cost is either cost per piece or total cost: Quantity x Cost (per piece) So Gross Margin and Markup – if expressed in Dirhams – are both a different way of saying profit: GM = Markup = Profit = Price (Sales) – Cost However: People talk more often about Gross Margin and Markup in terms of percentages and here lies the difference: Gross Margin relates this profit to price or sales, and Markup relates this product to cost - GM% = Price – Cost or Sales – Cost Price Sales - Markup = Price – Cost Cost

GROSS MARGIN AND MARKUP EXAMPLES: effect WORKSHOP Product 1: Price / case = 60 Cost / case = 45 Gross Margin per case = Markup per case = Profit per case = 60 – 45 = 15 Gross Margin % = Gross Margin as a % of price = 15 = 25% 60 Markup % = Markup as a % of cost = 15 = 33% 45 Assume another product 2 with price/case=80 and cost/case=50: sell 20 cases of product 1 and 10 cases of product 2. What is the GM% of this sale: GM% = (20 x 60 + 10 x 80) – (20 x 45 + 10 x 50) = 30% (20 x 60 + 10 x 80)

TRADE OFFER Trade offer is 10+1 Price is dhs. 85/case effect WORKSHOP Trade offer is 10+1 Price is dhs. 85/case Cost is dhs. 65/case GM without trade offer = (85-65) 85 GM with trade offer is 10x85-(10+1)x65 10x85 Effective price is 10x85 11

CREDIT TERMS effect WORKSHOP Credit period: number of days after statement day that client has to pay Statement day(s): typically once a month, at end of month Credit Limit: maximum amount of dirhams outstanding If purchases are dhs 3,000 per month and terms are 30days from statement: - what is effective credit period for the client? - what should be the minimum credit limit?

effect IN 30 SECONDS effect WORKSHOP effect is a high quality energy drink from Germany It is growing fast all around the world and is already no.2 in Germany and no.4 in Europe effect has the well known and accepted energy drink taste but costs less than its main competitor This means that if you switch to effect, you can make substantial savings in your purchases effect comes in the typical 250ml can, but has a simple and puristic design Provided effect is the exclusive energy drink in your establishment, we can give extensive marketing support based on the volume of your purchases For this marketing support we have a variety of advertising and other branding material, and can also tailor make some if the volumes justify it

MARKETING TOOLS POS Cash Free Stock Sampling Volume incentives effect WORKSHOP POS Cash Free Stock Sampling Volume incentives Staff incentives Event support Menu printing Cocktail menus

MARKETING TOOLS: POS MATERIAL effect WORKSHOP big chiller- 25 cases cube chiller- 50 cans t-shirts illuminated chalk board Magnetic display cooler box table tents posters napkins

MARKETING TOOLS: FREE STOCK effect WORKSHOP First fill of minibar Upfront incentives For staff party

MARKETING TOOLS: VOLUME INCENTIVES effect WORKSHOP Objective is to stimulate volumes Can be paid in cash or in stock Should be defined in brackets of purchase Note: always on purchase

MARKETING TOOLS: STAFF INCENTIVES effect WORKSHOP To stimulate sales Specially if not exclusive Volume dependent (eg dhs/case) Can be in cash or otherwise

MARKETING TOOLS: MENUS AND RECIPES effect WORKSHOP Menu printing - we can design the menu - pay some or all of printing costs - the more ESF brands the better! Cocktail and Mocktail recipes - this can increase energy drink consumption - we have many recipes - we can create recipes specially for the client - can include Fabbri syrups and Ferrarelle - staff training and menu design/printing

effect EXCLUSIVITY Exclusivity = only effect available Two reasons: WORKSHOP Exclusivity = only effect available Two reasons: - if not exclusive, only RB will sell and everybody will be disappointed with effect - we want to support the client, but for this we need good sales and knowledge of volumes Particularly necessary in on-trade: cafes, restaurants, bars, clubs, sports, gyms, games

ACTION WITH VERY SMALL CUSTOMERS effect WORKSHOP Increase sales • more effect - make exclusive! - marketing activities - cocktails / mocktails - promotions • sell other products Reduce Service • drop • reduce frequency • pass to vansales if on route • customer can pick up himself

FREQUENTLY ASKED QUESTIONS BY THE CUSTOMER effect WORKSHOP Question Answer Where are you available? Why are you not advertising (like RB)? Do we have sugar free? What if the clients don’t come because there is no RB? What if a client asks for RB? • All important retail • Increasingly in on-trade We prefer passing the money to the customer We will soon Are they coming to your fantastic establishment just because of RB? Serve effect and show him that it is just as good or better

dhs / case effect PROFITABILITY MODEL FOR SALES PEOPLE effect WORKSHOP Sales Price = to be paid by customer 90* Pocket as incentive* Spend on Marketing* • 50% paid for by ESF • charged at cost Cost Of Goods Sold = to be paid to ESF 60 Product Cost 35 * up to Manager

effect PROPOSAL MODEL : CONCEPTS WORKSHOP Trade offer Volume incentive COG(S) Amortisation • To stimulate large size orders • buy 10, get 1 free : 10+1 • To stimulate overall consumption • Depends on targets • Can be paid in money or goods • Based on past consumption • Cost of Goods Sold • Value of the cases sold • Period over which something is paid for • Usually with large, upfront expenditures

effect (MARKETING) SUPPORT TOOLS WORKSHOP Price • discount Trade offer Purchase size • increase order size • 10+1, 15+2, etc. Start-up • first filling / upfront • staff party • cash cases • in cases Business Volumes Incentives Marketing Support Tools money • in dhs / case Bar staff Equipment • chillers • magnetic / electronic Shirts POS Bar materials • coasters • stirrers • napkins • etc. Other – custom made Other • events • effect night / sampling • cocktail recipes • competitions

?? WHO DECIDES ?? effect PROPOSALS : DIFFERENT AUDIENCES WORKSHOP Purchasing Manager Bar / Event Manager Primary Objective • low cost of products • successful product • support for his activities Marketing Tools • price • trade offer • business volume incentives in cases • start-up volume incentives • start up cash • business volume incentive in cash • bar staff incentives and party allowance • POS • promotions, competitions, etc. ?? WHO DECIDES ??

TIPS FOR A WINNING AND PROFITABLE PROPOSAL effect WORKSHOP What is the current consumption of energy drink? What is the current deal with RB? Find out who the decision maker is, or are there two? Understand clearly what is important to each decision maker Try to keep the price high and avoid trade offers if you can If you need to incentivate the manager, make it volume dependent (volume incentives) Giving cases is better than giving cash, because the value to the recipient of a case is much higher (e.g. 90) than to you!