Amalgamated Food Products (AFP) markets a meat loaf mix under the brand name “Quality
Kitchens” in far western United States. The mix is packaged in foil packets, and contains
cracker crumbs, meal, seasonings and other ingredients. The purchaser mixes the
ingredients together with an egg and ground beef to make a meat loaf. The mix has the
effect of stretching the meat loaf, as well as seasoning it.
The Quality Kitchen meat loaf mix is an established brand, and although its sales are not
large, it is a consistently profitable item. Sally Franklin has just joined AFP as brand manager,
and the meat loaf product was assigned to her. Her first task is to prepare a sales forecast,
and a budget for promotion and advertising for the next year. She collected the historical
data shown in the table on the next page. These data included sales of the meat loaf mix,
and also the expenditures for promotion and advertising over the past 24 quarters, all in
thousands of dollars. Also included is an index of “general economic conditions” in the meat
loaf market area. High values of the index indicate “good” economic times.
The meat loaf mix is sold through food brokers in Seattle, San Francisco, Los Angeles, and
Denver. Advertising expenditures are directed at the consumer in magazines such as
Women’s Day, and in newspapers. Promotion expenditures, on the other hand, are directed
at the food broker or store manager. These consist of special deals such as getting a fifth
case free if four were purchased, short term increases in broker commissions, or sales
contests among broker salesmen (with prizes such as trips to Hawaii).
Ms. Franklin was quite puzzled by the great variability in the sales of the meat loaf mix from
quarter to quarter, and also at the great variations in past expenditures for promotion and
advertising. Upon inquiry, the sales vice president explained that there was a general policy
that the company should either promote or advertise in a...
