HBP# IM1251

IMD-7-2393
18.07.2022

BHANTON TOWELS:
THE PRICING DILEMMA OF
AN EXPORTER

Professors Dominique Turpin of IMD, Sandeep Puri and Maria Theresa Manalac of
the Asian Institute of Management (Philippines), and Shweta Pandey of National
Taiwan University (Taiwan) prepared this disguised case as a basis for class
discussion rather than to illustrate either effective or ineffective handling of a
business situation.

Copyright © 2022 by IMD – International Institute for Management Development, Lausanne, Switzerland
(www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form
or by any means without the prior written permission of IMD.

This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
 IMD-7-2393
BHANTON TOWELS

The moment you make a mistake in pricing, you’re eating into your
reputation or your profits.

Katie Paine, founder and CEO of KDPaine & Partners1

On 16 April 2022, during Holy Week celebrations in the Philippines, Bhanton Towels
(Bhanton) shifted base to a new modern office in Makati. Judy Irvine, the managing
director of Bhanton, was pleased with the company’s growth over the past five years –
Bhanton had reported revenues of ₱2.97 billion 2 in 2021, a growth of 13.4% over the
previous financial year. Although 2020 had been a challenging year for the company,
it still managed growth of 2.3% over its revenue in 2019 (see Exhibit 1). Judy seemed
optimistic about Bhanton’s future and was planning for the next five years, hoping the
company could achieve revenues of ₱5billion by 2024. However, her positive mood soon
evaporated when Amber McCutcheon, a company director, walked into her office looking
extremely concerned. Judy asked, “What’s the matter, Amber? Is something bothering
you?” Amber’s reply was not what Judy had anticipated. "Have you seen the email
from one of our major customers in Europe? It has cancelled its June order for 200
metric tons (MT)3 of towels because of the Ukraine-Russia conflict4 affecting its
business? We have procured the raw material. We already have a shortfall of 150 MT
in production for May and June 2022, and now it will be a shortfall of 500 MT. At the
same time, our sales office has received an order for 200 MT of towels from a new
customer in China, AliTex Enterprise (AliTex), who can give us orders for 200-300 MT
per month. However, it is asking for a price of ₱190 per kg inclusive of all costs and
taxes. This is much less than our cost price (see Exhibit 2) and less than our selling
price to major key accounts like Walmart, IKEA, Target and Sainsbury’s. However,
unlike our other customers who pay within 30-45 days on receipt of delivery, AliTex is
willing to pay within 15 days.”

Judy and Amber clearly faced a dilemma.

COMPANY BACKGROUND
Bhanton Towels was founded in 2002 by Bhanu Robredo and her husband
Tony Johnson with an initial investment of ₱50 million in a single unit
making top-quality yarn. The company soon became one of the leading
manufacturers of terry towels in Southeast Asia, producing towels from
selected natural raw materials following eco- friendly manufacturing
methods. The towels promised a pampering touch and a premium after-bath
experience. By embracing new yarn technologies and producing seasonal and

1
Chapter 1, Introduction to Pricing and Profitability
Management.
https://www.oreilly.com/library/view/pricing-and-profitability/9780470827055/
chapter01.html (accessed on 16 April 2022).
2
₱ = PHP = Philippine peso; ₱52.17 = US$1 on 16 April 2022.
3
1 MT=1,000 kg.

© 2022 by IMD 2
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
 IMD-7-2393
BHANTON TOWELS
4
The retailer used the force majeure clause to cancel this order.

© 2022 by IMD 3
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
 IMD-7-2393
BHANTON TOWELS

fashionable designs, the company ensured that it continued to innovate and

manufacture the best quality towels, ranging from hand towels and face
towels to bath towels, with sizes available from 400 GSM to 600 GSM. 5

The company committed to the total satisfaction of its customers,

employees and investors with unshakeable faith, based on customer
delight, integrity, teamwork, continuous growth and development. In 2015,
Bhanu and Tony passed on the responsibility of running the company to
Judy Irvine and by 2022 the company had 770 employees operating in the
US, Dubai, Europe, Singapore and Hong Kong. It had two manufacturing
plants in the Philippines (Bulacan and Rizal) with a monthly production
capacity of 2,000 MT. The company planned to increase its capacity to
3,000 MT per month by January 2023.

PRICING STRATEGY
According to Judy:

Pricing your product correctly, giving complete and accurate quotations,

choosing the terms of the sale and selecting the proper payment
method are four critical elements in making a profit on your export sales.

Bhanton took into consideration product-related costs, market demand,

competition, transportation, sales commission, insurance, taxes, duties and
financing to calculate the final cost and selling prices. With a fixed cost of
₱174 million, the average selling price was around ₱247.7 per kg, inclusive
of all costs and taxes.

Bhanton faced competition from textile companies in India, Bangladesh,

Vietnam and Pakistan. Most companies were selling their regular range of
towels for around ₱230 to
₱260 per kg, inclusive of all costs and taxes. Key competing factors in the
industry were trust, responsiveness, value for money, reliability, production
capacity, price, delivery schedules, quality of yarn, GSM, etc. The volume
of the order was a major negotiating factor in many cases.

CUSTOMER MANAGEMENT AT BHANTON

Since 80% of Bhanton’s revenues came from repeat custom, the company
maintained a near-obsessive focus on its key customers. Amber knew that
developing and maintaining solid relationships with key accounts was critical
to the company’s success in the hyper- competitive towel export market.
While Bhanton’s churn rate6 for 2021 was 3.5%, which

5
GSM − grams per square meter, i.e. the weight of the towel. The higher the GSM,

© 2022 by IMD 4
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
 IMD-7-2393
BHANTON TOWELS
the heavier the towel. Premium towels have a higher GSM.
6
Churn rate is calculated as the number of customers who stop doing business with
a company over a given period of time divided by the number of new customers in
the same period.

© 2022 by IMD 5
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
 IMD-7-2393
BHANTON TOWELS

was relatively low compared to the competition, the defection rate 7 was 8.4%.
Until 2015, the company’s focus had been on big retailers in the US and
Europe, but in 2017 Judy expanded the company’s presence in Dubai,
Singapore and Hong Kong. In 2022, it supplied products to more than 100
retailers in these countries.

Major customers
Bhanton had many renowned, revenue-generating customers, including
Walmart, IKEA, Target and Sainsbury’s in the US and Europe. In Singapore,
its major customer was NTUC FairPrice (see Exhibit 3). In the domestic
market, it supplied towels to all the major retailers such as Puregold Price
Club, SM Retail, Robinsons Retail and Metro Retail Stores. Most of these
retailers bought towels from two or three vendors from different countries
to reduce dependence on any one supplier.

Walmart Inc.
Walmart Inc. was an American multinational retail corporation operating a
chain of hypermarkets, discount department stores and grocery stores. Sam
Walton founded the company in 1962. As of 31 January 2022, Walmart had
10,593 stores and clubs in 24 countries. According to the Fortune Global 500
list in 2021, Walmart was the world’s largest company by revenue, with a
revenue of US$548.743 billion.8 It was one of Bhanton’s major key accounts,
constituting around 12% to 15% of its manufacturing capacity. Bhanton sold its
range of towels to Walmart at a low profit because of the high volume of
business. Walmart orders also helped to recover a significant part of the
fixed costs.

IKEA
IKEA was a Dutch-headquartered multinational conglomerate, which
started in Sweden in 1943. The company designed and sold ready-to-
assemble furniture, kitchen appliances, and home accessories, among
other goods and home services.9 It was another of Bhanton’s key accounts,
constituting around 10% of its volume. It purchased Bhanton towels for its
stores in Europe, Singapore and Hong Kong.

Target Corporation
Target Corporation was a leading department store chain in America with
more than 1,900 stores in the US.10 Target offered good profitability to
Bhanton since it purchased premium quality towels such as bamboo and
Egyptian cotton towels along with the regular range of towels. It
constituted around 7% to 8% of Bhanton’s volume.

© 2022 by IMD 6
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
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BHANTON TOWELS
7
Defection rate is the rate at which existing customers leave one company and switch
over to a competitor.
8
https://en.wikipedia.org/wiki/Walmart (accessed on 7 April 2022).
9
https://en.wikipedia.org/wiki/IKEA (accessed on 9 April 2022).
10
https://en.wikipedia.org/wiki/Target_Corporation (accessed on 9 April 2022).

© 2022 by IMD 7
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
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BHANTON TOWELS

Sainsbury’s
Sainsbury’s was the second largest chain of supermarkets in the UK,
founded in 1869.11 It was one of Bhanton’s oldest customers and constituted
around 5% to 7% of its volume. Profitability was reasonable compared with a
few other high-volume customers.

ALITEX ENTERPRISES
AliTex Enterprises was a leading export house in Shenzhen, China. It started its
business in 2005 and reported sales of ¥2.5 billion12 in 2021. It supplied bed
linen, laundry bags, scrub suits, towels, medical apparel for patients,
sheets and pillowcases to retailers, laundries, hospitals and hotels in
Australia, Bulgaria, Canada, France, Germany, Greece, Ireland, Italy,
Russia, the Netherlands, New Zealand, Panama, Sri Lanka, United Arab
Emirates, the UK and the US. The company procured its products from
good-quality manufacturers in Vietnam, Bangladesh, India and Pakistan. It
bought products from the manufacturers at low prices by offering them high
volumes or by asking for low capacity utilization. Alex Bojmelgrin,
procurement manager of AliTex had approached Bhanton with an offer to
buy 200 MT of towels in May at a price of ₱190 per kg, inclusive of all costs
and taxes and promised repeat business of 200 to 300 MT per month.

THE DILEMMA
Although Bhanton needed additional orders to achieve its monthly
production targets of 2,000 MT for May and June, the price AliTex was
asking could have a long-term impact on Bhanton’s profitability and
reputation in the market. It could also potentially affect its relationship with
its key accounts if they found out.

Amber was interested in going ahead with AliTex’s order since she was
looking for opportunities to enter new markets such as Australia, Canada,
China and New Zealand. However, Judy was concerned about the
possibility of AliTex supplying its products to Bhanton’s key customers in
the US and Europe. Could Bhanton sell its towels to AliTex for only ₱190
per kg? And if not, what was the minimum possible rate? What alternative
pricing strategies should it have for customers like AliTex. Judy was also
exploring other potential sales and customer acquisition strategies to
increase the monthly sales volume by 1,000 MT to reduce Bhanton’s
dependence on retail customers.

© 2022 by IMD 8
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
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BHANTON TOWELS

11
https://en.wikipedia.org/wiki/Sainsbury%27s (accessed on 9 April 2022).
12
Chinese Yuan 6.65 = US$1.

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This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian Institute of Management
from Jun 2024 to Nov 2024.
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BHANTON TOWELS

Exhibit 1: Bhanton Towels selected financials, 2017–2021 (in ₱ million)

2017 2018 2019 2020 2021

Net revenue 1,75 2,10 2,55 2,61 2,96

6 8 9 8 8
Cost of sales 867 943 1,01 1,08 1,28
4 1 9
Operating 408 531 634 697 746
expenses
Other expenses* 39 51 59 139 192
Net income 442 583 852 701 741

Note: ₱ = PHP = Philippine Peso; figures disguised to maintain confidentiality; *includes gain
(loss) on equity investments, settlement income, benefit (provision) for income taxes,
cumulative effect of changes in accounting principles and other income.

Source: Company information

Exhibit 2: Manufacturing cost of towels (₱ per kg)

Fixed cost 12
0
Variable cost 80
Tax (8%) 16

Logistic costs 10

Total cost 22
6

Source: Company information

Exhibit 3: Business from major customers (%)

Walmart 12-15

IKEA 10

Target 7-8
Sainsbury’s 5-7

Others 60

Total 100

Source: Company information

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0 Institute of Management
This document is authorized for use only in Professor Sandeep Puri's WSGSB - EMBA 2025-Marketing Mastery for Business Growth at Asian
from Jun 2024 to Nov 2024.