Classic Knitwear was established in 1995 as a manufacturer and distributor of unbranded casual knit apparel it was operated by Brandon Miller- Chief Marketing Officer, Robert Ortiz-CEO and Sandra Chong-CFO. Classic operated in the category of non-fashion casual knitwear, all the revenues were earned on U.S. sales.
Seventy five percent of classic revenues were by screen-print channels (customized t-shirts and other knitwear with logos of everything from rock bands to small businesses to tourist destinations), the other twenty five percent was sold through mass retail channel as a private-label merchandise.
By late 2005, Miller’s marketing team began researching a number of proposed product innovations. In February 2006 they landed on an interesting prospect: knitwear treated chemically to repel insects. After this the team set out to analyze the viability of a new national brand of high-quality men’s and boy’s insect-repellent shirts.
The opportunity arose to negotiate a licensing partnership with Guardian, a manufacturer of insect repellents that offered odorless protection against mosquitoes, ticks, flies and no-see ums.
The potential alliance would allow Classic to use the Guardian name on a line of insect repellent shirts.
Guardian Brand had a patented insect-repellant clothing technology. And the product was very innovative, this gives them a good market potential. The opportunity of the market potential combined with the production efficiency of the company, could make a sustainable competitive advantage
They had a cost advantage over the other US producers because of the high-volume and low SKU (stock keeping unit) production runs.
With the new Repellent knitwear the SKU will have 16 and they probably had to deal with inefficiency problems on the production.
Classic operated in the category if non-fashion casual knitwear which represented $24.5 billion. From the total of the non-fashion casual knitwear marketing, T-shirts represented a fifty third percent. Due to its focus on the screen-print sector Classic invested more heavily in t-shirts than in the overall industry.
The direct competitors of Classic were little-known firms like B&B Activewear and The Big Tree. Also had competitors for private label business, JamesBrands was the leader, followed by FlowerKnit and Greenville Corporation’s TopTops Division, this three firms operated on gross margin of 30 40%
The retailers were provided with 50% margin on branded knitwear and 40% margin on private label knitwear with the new product will provide 45% margin.
The company has a projection on sales for 10,000 displays in the next two years after the product is first offered to the market, they decided to put 50% in discount stores, 25% in general merchandise stores and 25% in sporting goods and apparel clothes. They need to invest a considerable amount of money in resources to help them develop the channel, because they had no experience in those retail channels.
They had made a research with an online survey they send one thousand e-mail invitations to the people from the website Consumer.com to answer the survey and they got one hundred and eighty five respondents. And based on the results 60% of the respondents who indicated they would definitely try the product, would do so within the two-year introduction period. Also the company predicted that at least 50% would buy an additional shirt the following year.
They decided not to include the name of Classic Knitwear on the product; it will be called Guardian Apparel. Also they haven’t done an extensive market research, they are just based on the survey, and probably the numbers won’t be fully reliable for making big decisions.
The agreement forced Classic Guardian to meet a series of steadily rising annual net sales target over the first four years, and the target fir year four must be met in each subsequent year. If they failed to meet the requirements the license would be cancelled.
There are weaknesses in the branding of the product one of the most relevant is that only guardian logo is being used on the product, this might create problems for Classic if there is any conflict between the companies in the future.
The determined marketing investment has been reduced to $3 million from the initial of $8-$10 million.