Lipman Bottle Company

Case Analysis
Group 1: Ajay Kumar| Krubakar| G Nitin| Nikhil Chowdhary| Shipra
Agrawal

About Lipman
A Bottle Distributor established in 1909 operating in Albany, New
York.
Two major activities Bottle distribution , printing operations.
Capacity of printing is 1 million bottles.

Sales ($6.2Mn)
Printing; 1%
Distribution; 99%

Printing is considered as a valuable service , and Mr. Lipman is

trying to find a pricing strategy , Which could earn him a
reasonable return.

About Bottle industry

Increased Price competition in bottle industry.
Lipman is considering an expansion to New York New Jersey due
to their market potentials
Two primary types of bottle printers :
Simple designers Standard design and price lists
Custom decorators Special pricing adjusted for design difficulties.
Lipman provided both kinds of printing services.
Printing capacity: 10 printing machines (8 semiautomatic and 2
automatic) , 8 drying ovens.

Infuencing factors for Pricing

Bottle
Bottle
price
price

Order
Order
Quantity
Quantity

Larger bottles takes longer to print

Setup cost , machine learning cost decreases per bottle as

order quantity increases

Separatio
Separatio

ns
ns

No of individual impressions required to print single bottle.

One for Round bottles , Two for Oval bottles
Automatic machines take one separation for oval bottles.
Oval
Bottle
s

Roun
d
Bottle
s

Pricing problems at hand

1

Price Differential for the bottle size is not

reasonable.

Automatic machines take one separation for Oval

bottles , less printing price for Oval bottles.

NY-NJ market is dominantly custom decorating.

Freight charges also needs to be considered.

Goal is to earn 30% profit on sales before tax (at

capacity)

Questions

Question 1
Calculate the variable cost per thousand bottles
for :
one-separation rounds, two separations rounds
and two-separation oval , assuming that all ovals
are printed on machine with automatic features for
ovals.
Albany ( Scrap included ) , New York- New Jersey
( Freight included not scrap)
Two bottle ranges 0-1 Oz , 17-32 Oz
Two order quantity ranges 5000 9999 , 100000249999

Solution 1

Albony

NY-NJ

Bottl
1
2
2
1
2
2
e
Order separati separati separatio separati separati separatio
Size Size
on Job on job n oval job on Job on job n oval job
50009999

22.561

51.474

42.110 22.221

49.234

39.871

500017-32 9999

24.061

54.473

45.110 47.351

74.364

65.001

1000000-1 249999 18.827

44.006

34.643 18.487

41.766

32.403

10000017-32 249999 20.327

47.006

37.643 43.617

66.896

57.533

0-1

Question 2
Prepare a suggested price list for the Albany
area . For
One-separation round and two-separation rounds or
ovals,
Only two sizes 0-1oz , 17-32 oz
Only two order quantity ranges 5000-9999,
100000-249999
How did Mr. Lipmans goal of a 30 percent margin (at
capacity) affect your price recommendations ?

Solution 2
Bottle
Size

1
separation
Job

Break Even
30% Profit Margin
2
2
2
separation separation 1 separation
separation
2 separation
job
oval job
Job
job
oval job

17-32

Order
Size
50009999
50009999

0-1

100000249999

25.727

50.906

41.543

36.75312139

72.72338563

59.34738563

17-32

100000249999

27.227

53.906

44.543

38.89600136

77.00914559

63.63314559

0-1

Bottle
Size

29.461

58.374

49.010

42.08685143

83.39075048

70.01475048

30.961

61.373

52.010

44.22942286

87.67589333

74.29989333

17-32

Order
Size
50009999
50009999

0-1

100000249999

18.20

42.40

17-32

100000249999

31.35

70.95

0-1

1 separation
Job

2 separation
job

40.45

94.00

70.60

160.40

Competitors
prices

Question 3

Which products should the company

attempt to sell in New York New Jersey ?
Explain ?

Solution 3

It is profitable to sell two separation jobs and oval jobs of smaller

quantity.
Shipping cost is higher for larger bottles as compared to smaller
ones.
Gross margins are higher for larger bottles as compared to
smaller bottles.
Competitor
s Prices

Lipmans
Prices
2
1 separation separation
Job
job

2
separation
oval job

1
separation
Job

2
separation
job

41.60

80.19

66.82

40.45

94.00

77.50

116.09

102.72

70.60

160.40

36.27

69.52

56.15

18.20

42.40

72.17

105.42

92.05

31.35

70.95

!
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