MBB First Round - StayPro - Consumer Growth Strategy

• StayPro is a public company
• They sell their products in the US and internationally
• Their main product is CamPro, a mounted camera mainly used when playing action sports
• CamPro has also recently started being used in other recreational activities
• StayPro does not manufacture their products, their manufacturing is outsourced in China
• StayPro sells their products through 3 channels: distributors, retailers and StayPro’s Website
• The industry is highly competitive and customers are very loyal to each brand
• CamPro price is $250
• Gross margin has remained steady at 50%
• Over the last 5 years, 60% of camera sales have come from the US and the split is expected to be similar in 2025

A sample answer would go along the following line:

• Market challenges
  • Market growth trends
    • Growth deceleration
    • Market saturation
    • New action camera market trends
  • Competitive landscape
    • New competitors
    • Appearance of substitutes
  • Customer loyalty
    • New customer preferences
    • Low brand / product loyalty
• Product challenges
  • Product positioning
    • Outdated marketing positioning
    • Outdated feature positioning
    • Outdated customer segment positioning
    • Lack of personalization / cross-selling products
  • Demand shifts
    • Demand shift to other activities
    • Demand shift to other brands
    • Demand shift to other technologies
  • Pricing elasticity
    • Mismatch of pricing and value expected
    • Mismatch of pricing vs competitors
• Operational challenges
  • Manufacturing supply
    • Lack of capabilities for innovation / patents
    • Inability to manufactured expected demand
  • Sales channels performance
    • Performance decreased for distributors
    • Performance decrease for retailers
    • Performance decrease for online

CHART CONCLUSIONS

• Growth of number of customers is slowing down, from ~40% growth between 2021 and 2024 to ~10% expected growth between 2024 and 2027
• The same is happening to market penetration, which grew ~25% between 2021 and 2024 and it is expected to grow ~12% between 2024 and 2027, showing signs of market saturation (i.e., little or no more customers to sell the same products)
• +80% of the market is very competed and concentrated in 4 main players, with no market share changes over the last 5 years. That indicates a mature market with high customer loyalty to brands, showing little opportunities to grow for StayPro stealing market share from competitors
• Overall, it looks like the US market allows limited growth opportunities for our client with the current product portfolio
• On top, there is high risk for any competitor to start a war price trying to win market share, eroding margins of other players who want to compete in price

MATH SOLUTION

Step 1: estimate 2025 revenues in the US 

US revenues = addressable market x market penetration x StayPro market share x pricing = 
16M customers x 90% x 30% x $250 = $1.08B

Step 2: estimate 2025 international revenues

International revenues = $1.08B US revenues x (40% / 60%) = $0.72B

Step 3: estimate total 2025 revenues

Total revenues = $1.08B + $0.72B = $1.8B

Step 4: estimate 2025 COGS

COGS = 50% x total revenues = $1.8B / 2 = $0.9B

Step 5: estimate 2025 gross profit

Gross profit = total revenues – COGS = $1.8B - $0.9B = $0.9B

There are three main ways for StayPro to grow their revenues:

• Increase current market share in existing markets earning share from competitors
  • Invest and optimize marketing to reinforce brand and product positioning
  • Improve their products to differentiate with competitors
  • Optimizing pricing and promotional strategy
  • Optimize sales channel performance and explore new channels
• Expand to new product categories
  • Innovate with new product adjacencies in the action sport category (organically or inorganically)
  • Grow on the wearables category
  • Build cross-selling products or services (e.g., camera accessories, Cloud storage services for video, etc.)
• Expand to new markets
  • Enter new geographies (organically or inorganically)

APPROACH

A good candidate would calculate the expected revenue on year 2 and determine which of the alternatives is the best option.

An excellent candidate will consider the sales channel distribution and would assume margins are higher on StayPro’s website since there is no intermediary, and lower on the distributor and retail channels.

MATH SOLUTION

Year 1 revenues = market size x market share

• Argentina = $1B
• Japan = $1B
• Australia = $0.6B
• Sweden = $0.5B

Year 2 revenues = year 1 revenues x (1 + market growth)

• Argentina = $1.1B
• Japan = $1.1B
• Australia = $0.66B
• Sweden = $0.6B

CONCLUSIONS

Argentina and Japan provide the same revenue at the second year.  Argentina sales channel distribution suggest a higher gross margin. However, there are other relevant factors to make the final expansion decision as:

• Current competitors in the country
• Potential competitive response from other competitors
• Cultural and brand integration in the country
• Local regulations
• Feasibility and complexity of building the supply chain in the country

Recommendation

• Growth stagnation is an industry-wide challenge due to market saturation in the action camera category
• Given the competitive landscape, StayPro should do a geographical expansion to keep growing beyond organic market growth
• Argentina is the most attractive option for expansion, with $1.1B expected revenues on year 2 and a larger share of the margin than Japan due to bigger presence of the website channel

Risks

• Costs associated with expanding into Argentina compared to other countries or options
• Potential competitive responses to market entry in Argentina and their impact on revenue forecasts
• Year 1 market share assumptions may be overly optimistic. StayPro might face challenges in achieving these figures so quickly

Next steps

• Continue doing research to expand into the Argentinian market
• Assess necessary internal capabilities needed to execute the expansion strategy
• Plan marketing mix, including advertising, distribution channels, promotions and pricing