Carvel Case Study

Pricing

The Exhibit chart indicates that the price of carvel products is the lowest among all three premium ice-cream brand, partly because of the recent 10% to 20% price reduction. We don’t think price reduction is a wise way to develop the Beijing market, because, first, the possible growth on sales triggered by the price reduction is likely contribute nothing on profit. Second, the price reduction would isolate us from other premium brands. Finally, our high-end image would be jeopardized.

Carvel ice cream cakes are more expensive than local ice cream but cheaper than the main competitors. Flour-based cake that Chinese people prefer for their special days is cheaper than ice cream cake. In order to decrease the cost, Wang plans to change the level of over-run from 30 to 40 per cent to 45 to 50 per cent so he will be able to lower costs by five per cent. Increasing the percentage means people eat less ice cream and more air and it would reduce the quality, however, Chinese people like the ice cream that has more air. Therefore, Mr. Wang should really push for this change in quality if it means lowering the cost and meeting the customer’s preference. If the product fits the customer’s taste, it will definitely lead to increase in sales.

Place (Distribution)

Carvel Beijing has 10 retail stores and 150 wholesale accounts. 4 of the retail stores have full service with a space to sit and they make the products in the store. 6 of the stores are small and they only make soft ice cream in the store and bring hard ice cream and ice cream cake from the main store. The small stores can be built with 70,000 Rmb. and the biggest store needs 415,000 Rmb. to be built. Generally, big stores need to sell about 85,000 Rmb. and small ones need to sell about 7,000 Rmb. per month to break even. The wholesale includes 25 supermarkets that sell expensive products, 25 local supermarkets, 4 bakeries, and 60 restaurants and bars. Wholesalers buy Carvel products with 30% discount...