Determining Market Size - Infant Formula

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Learning Outcomes

Students should gain familiarity with the following elements of business information literacy and specific information resources.

Information Literacy:

  • Strategies for breaking large research projects into manageable stages or pieces.
  • The distinction and relative advantages between primary and secondary market research.
  • The kinds of market information that are freely available on the Internet.
  • Availability, currency, coverage, and cost of pre-packaged market research reports.
  • How to apply indirectly relevant reports.
  • Comparing methodologies, their inherent assumptions, and the value of obtaining numbers from multiple sources.

Resources:

  • A source for pre-packaged market research reports.
  • A source for demographic information.
  • A source for consumer survey data.


Premise

"A food engineering firm has been tinkering with soy beans and believes they can create an improved lactose-free infant formula. They're unfamiliar with the baby food industry and are trying to decide whether to launch their own product or sell their patent to an existing player. Your team of outside consultants has been hired to conduct some preliminary market research to help them with this decision. Your first task is to determine the market size for infant formula."


Preparation

The librarian should be prepared with a spreadsheet containing labels and formulas for calculating market share, to which data discovered during the case can be added, resulting in several alternative market size calculations at the end of the case. Depending on the data available the spreadsheet might look like the table below. Remember that this is a "quick and dirty" calculation and the purpose is to engage students by supplying a logical progression to the case, which attempts to introduce students to the kinds of information sources and the principles of information literacy that would be relevant in such a situation.

Source 1
High Estimate
Source 1
Low Estimate
Source 2
High Estimate
Source 2
Low Estimate
Dollar value of formula one
infant consumes per year
(multiplied by)
Total number of infants
(multiplied by)
Percentage consuming formula
(equals)
Market Size


Preliminary Discussion

The librarian can suggest that while the main question of interest is "What is the market size for infant formula?", this question can best be answered by first discovering answers to smaller questions. A discussion should ensue where students brainstorm additional questions that can help them arrive at a dollar figure for the market size of infant formula. Examples may include:

  • How many infants are there?
  • How many infants drink formula vs. breast milk?
  • How much formula does an infant drink?
  • What is the price range for formula?

As this is a brainstorming exercise, the librarian should list these questions on the board without discounting any ideas. The librarian can then use these questions to illustrate the relative advantages of primary and secondary research, how each can address these information needs with varying effectiveness and cost, and which the library can assist with. For example, price may best be discovered by making a trip to the local grocery store rather than searching through a database.

The librarian can then point out that the focus of this case is not to fully demonstrate the best way to determine a market's size, but to give students the opportunity to explore some of the resources that would be useful in such a task. Not all of the questions listed will be addressed, and in some cases assumptions will be made simply for the sake of moving on to the next stage of the case.


First Resource

The librarian may demonstrate the ease with which market research reports on almost any topic can be found on the Internet. Students should be quick to note the hefty price tags invariably attached to such reports (searching the MarketResearch.com site for "infant formula" is illustrative). The librarian can then explain that while the library cannot provide every market research report, there are some limited collections available. Depending on the library's subscriptions these may include sources like Mintel, Datamonitor, IBIS World, MarketResearch.com Academic, Frost & Sullivan, or any number of others.

During a brief demonstration of the resource the librarian can discuss principles of information literacy specific to that resource, such as the currency of information and how students can discover relevant trends and data in reports that may not at first seem relevant to their research topic. The librarian can then allow them time to explore the resource on their own (preferably in teams), looking for information that can help answer any of the questions discussed during the brainstorming session. Volunteers can share what they have found with the class.

The librarian should acknowledge the value of student discoveries. Among them should be either the total number of infants, the percentage that consume formula, or the dollar value of formula one infant consumes per year (which could be calculated by multiplying price and the number of units one infant consumes per year). The librarian can then begin populating the spreadsheet. For example, based on Mintel's "Baby Food and Drink - U.S. - January 2009" report, the spreadsheet might now look like this:

Source 1
High Estimate
Source 1
Low Estimate
Source 2
High Estimate
Source 2
Low Estimate
Dollar value of formula one
infant consumes per year
$2,000 $1,500 $2,000 $1,500
(multiplied by)
Total number of infants
(multiplied by)
Percentage consuming formula
(equals)
Market Size


Second Resource

It may be that the source for market research used during the first exercise conveniently provided a figure for the market size of infant formula. This should be noted, and the librarian can then discuss the importance of comparing multiple sources of information, addressing the alternatives in the report or presentation they are themselves creating, and justifying the source or the resulting figure that they determine to be the best. Assumptions should be cautioned against (though they may be necessary for the purposes of this case) and the need for rigorous thought behind the numbers or conclusions students decide upon should be stressed.

Furthermore, the librarian can complicate the scenario by suggesting that the team's client is considering launching the product on a trial basis in a local city. This means that "Total number of infants" is now the "Total number of infants in city X". The librarian may then demonstrate a source for demographic data, such as the U.S. Census Bureau (http://factfinder.census.gov/). Students can be given time to explore the resource to seek relevant information which they can share with the rest of the class. The librarian should update the spreadsheet, which may now look something like this:

Source 1
High Estimate
Source 1
Low Estimate
Source 2
High Estimate
Source 2
Low Estimate
Dollar value of formula one
infant consumes per year
$2,000 $1,500 $2,000 $1,500
(multiplied by)
Number of women who have given birth
in the past year in Provo, UT[1]
2,988 2,988 2,988 2,988
(multiplied by)
Percentage consuming formula
(equals)
Market Size for Provo, UT


Third Resource

Depending on the resources available and the data already collected, the librarian should demonstrate a resource that provides the remaining necessary data for the spreadsheet. Consumer survey data from a source like Simmons or MRI+, or government data like that provided through the National Survey of Children's Health (http://www.nschdata.org) can be introduced, with students taking time to explore the data. The librarian may now be able to complete the spreadsheet, as in the example below. (Example uses 37.7%, the percentage of homemakers with children younger than 12 months who are categorized as heavy users of infant formula by MRI+, and 11.1%, the percentage of infants in Utah who are never given breast milk during the first six months according to NSCH. These raw numbers would not be ideal for use in an actual market size calculation, but they can serve the case's demonstrative purposes.)

MRI+
High Estimate
MRI+
Low Estimate
NSCH
High Estimate
NSCH
Low Estimate
Dollar value of formula one
infant consumes per year
$2,000 $1,500 $2,000 $1,500
(multiplied by)
Number of women who have given birth
in the past year in Provo, UT[2]
2,988 2,988 2,988 2,988
(multiplied by)
Percentage of heavy or
exclusive formula drinkers
37.7% 37.7% 11.1% 11.1%
(equals)
Market Size for Provo, UT
$2.3 million $1.7 million $0.7 million $0.5 million


Wrap Up

With the spreadsheet displaying several alternative numbers for market size the librarian can reemphasize the need to check multiple sources of information, decide which sources to rely on in creating a paper or presentation, and the importance of providing a rationale for that decision. Even a question like "What is the market size for infant formula?" is less about finding a number than it is about discovering, understanding and applying data in a reasoned manner.

The librarian can review other principles of information literacy addressed during the session and remind students that the purpose of the case was to introduce these principles, techniques, and sources, as opposed to teaching them the best way to calculate a market's size, since the session's time constraints necessitate significant assumptions and shortcuts.

The librarian may also point students to a handout or website detailing additional information sources.


Submitted By

Andy Spackman
Business and Economics Librarian
Brigham Young University
andy_spackman@byu.edu
http://www.lib.byu.edu/business/

Originally Submitted: October 5, 2009