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Financial Forecasts

 

The financial Forecasts will based on the breakout strategy we formed and mainly includes following three parts:

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  1. The Initial Investment Requried

  2. Five Years Profit and Loss Projection

  3. Break Even Analysis

 

 

Initial Investment Required:

 

Since the limited resource Nike had regarding to the production of nutrition currently, Nike will need to acquire Paragon Laboratories to fill this resource gap. Paragon Laboratories is a supplements manufacturer including capsules, powders and tables and it is able to create annual sales around $15 million with only 20 to 50 employees. In order to estimate the cost of acquisition, current acquisition happened in the sports nutrition industry will be took as a reference. Irish dairy production group Glanbia PLC brought a protein shares maker with $74.6 million sales in 2014 for $153 million. Additionally, GSK bought Maxinutrition Group Holdings Limited, Europe’s top selling sports of Nutrition Company with sales of around £36 million for £162 million. Since the Paragon Laboratories is privately held manufacturer and have not formed any brand identity, the acquisition is estimated to close at $40 million approximately. In order to achieve the scalable production to support the global nutrition market, Nike will need to invest in R&D, production and distribution. 

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Years Profit and Loss Projection:

 

The current market size that is Nike interested in is $93 billion worldwide and the growth rate of this market is expect to be 8% on average. Nike’s ambition is to obtain an 8% market share in five years time, which will reach the same market share as GNC, current market leader. A detailed market share plan is provided to estimate the turnover of Nike Nutrition. Despite this, Nike’s objective is to begin the selling activity in the middle of 2016, since Nike will need half a year to acquire a nutrition manufacturer and realize the scalable production. 

 

 

THE MARKET SHARE PLAN OF NIKE NUTRITION:

 

Based on Nike’s market share plan and the market value of Nutrition Industry, the Estimated turnover from 2016 to 2020 are presented in the table. Due to the time required to invest in R&D, marketing, production and acquisition, Nike will start the market penetration after the second quarter of 2016, as a result, the market share and total turnover of Nike Nutrition will be relatively small. According to current leading companies’ annual reports, the cost of sale normally accounts 60% of sales and net profit margin is 12% on average. Because Nike will offer a competitive price in order to explore the market with a high speed, the estimation about net profit margin of Nike Nutrition would be 10%. Based on the analysis of Nike’s sales structure about sports related business, nearly 80% of the sales are U.S. based. In terms of the Nutrition Market, U.S. market has huge potential and accounts majority shares of the worldwide market. Therefore, Nike Nutrition will focus on the U.S. market and aiming to generate 80% of the global sale of Nike Nutrition from America.

Break Even Analysis:

BCC Research. (2008). Global Market for Sports Nutrition Worth $91.8 Billion in 2013. Retrieved February 10, 2015, from BCC Research: http://www.bccresearch.com/pressroom/fod/global-market-sports-nutrition-worth-$91.8-billion-2013

 

Euromonitor International. (2014). Sports Nutrition. Retrieved February 11, 2015, from Consumer Health: http://www.euromonitor.com/sports-nutrition

 

Ruthven. (2011). GlaxoSmithKline acquires Maximuscle brand. Retrieved

February 11, 2015, from Growth Business: http://www.growthbusiness.co.uk/news-and-market-deals/mergers-and-acquisitions/1602088/glaxosmithkline-acquires-maximuscle-brand.thtml

 

Starling. (2011). Glanbia bulks up consumer presence with $144m sports supplements acquisition. Retrieved February 11, 2015, from Nutra: http://www.nutraingredients-usa.com/Suppliers2/Glanbia-bulks-up-consumer-presence-with-144m-sports-supplements-acquisition

 

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