Quality Kitchens Meat Loaf Mix

1 Case Summary

Sally Franklin, the new brand manager of the "Quality Kitchens" meat loaf mix, has to prepare a sales forecast and a budget for promotion and advertising for the next year.

Her forecast is based on the past 24 quarters' historical data, which includes sales, expenditure for promotion and advertising and an index of the "general economic conditions" in the meat loaf market area.

Mrs. Franklin is confused by the great variability in the sales of the meat loaf mix from quarter to quarter, and also at the great variation in past expenditure for promotion and advertising.

This report is provided to analyze the effect of the explanatory variables on sales according to the historical data and to give strong arguments for future investments.

2 Assumptions & Variables

According to the historical data and the former manager's analysis, the following assumptions have to be considered in our report:

• Advertising and promotion could have a delayed effect on sales; we assume that these two variables have a double effect on sales: one during quarter "n" and a second effect on quarter "n+1".

• The index of "general economic conditions" variation; we assume an initial index of 100 as a reference (Ir=100). The "Variation of the Index" variable Vi is defined as the difference rate between the index value of quarter "n" and the index reference: Vi = (IndexQn – Ir)/Ir

• Season variable; we assume a seasonal Dummy variable Ds defined as below:

o Cold Season (Ds=0) which includes Quarter 1 & 4

o Warm Season (Ds=1) which includes Quarter 2 & 3

Therefore, the variable to be included