Your client is a chewing gum manufacturer in the United Kingdom and you’re currently at the airport waiting for your flight. In the time that you have, you’re thinking about how big the annual chewing gum market is in the UK in terms of market value.
This is a market sizing/estimation case so there is no right answer, but only a right approach.
Candidate should lay out his/her structure to estimate total market size. The request is for total market value so candidate is expected to give a monetary value.
Short Solution (Expand) (Collapse)
Suggested case structure:
Candidate should think about a structure first and explain this to the interviewer before starting to make assumptions.
When the structure is clear, candidate can start estimating by making his own assumptions without help from interviewer.
If candidate seems lost or needs help, interviewer can assist by giving hints below:
- First, assume total population of the UK.
- Secondly, think of which age group represents a heavy user of chewing gum or which age groups represent which consumption ratio.
- Thirdly, estimate how many gum-packs are being consumed per consumer (per week, month and/or year).
- Estimate price of a pack of gum and calculate total annual revenue.
We can make the following assumptions for our analysis:
- UK population is 80 m.
- Heavy user-group is between 10-20 years old and represents 20% of total population. Each user consumes 1 pack of gum per week.
- The remaining population of 80% consumes 1 pack of gum per month.
- Estimated price of a pack of gum is $0.80.
Heavy-user target group
- Heavy-user consumers: 80 m*20%=16 m.
- Heavy-user consumption per year: 16 m*52 weeks=832 m.
- Heavy-user market value per year: 832 m*$0.80=$665 m.
Rest of population
- Rest of population: 80 m*80%=64 m.
- Consumption per year: 64 m*12 months=768 m.
- Market value per year: 768 m*$0.80=$614 m.
Total market value
- $614 m+$665 m=$1.28 b
- Total estimated market value per year is $1.28 b.
- Which drivers affect consumption of chewing gum per person?
- How would changes to your assumptions affect the market size estimation?