DISERTACIONES, REFLEXIONES Y HORIZONTES

4.1 Profitability /operations CASE 1: CHILLED BEVERAGES

Question (posed by interviewer):

of a large consumer products company. Her division produces fruit

forms, all marketed under the same name: chilled (found in the milk section of the supermarket, usually), juice boxes, and frozen concentrate. This division has sales of $600 million per year. The entire company

The chilled segment represents $120 million in sales per year. While juice boxes and frozen concentrate are profitable, chilled juices are only breaking even in good quarters and losing money in bad

from upper management to sell the chilled juices business. What would you advise that she do? Information to be given if aske

ian could not deduce the correct answer. The philosopher's third clue: "The sum of the three children's ages is identical to the address of the house

played chess together often, years ago." The mathematician required more information (but assume the mathematician remembered the

The philosopher then gave his fourth clue: "The oldest child looks like me." At this point, the mathematician was able to determine the ages of the three children. Here is your problem: What are the ages of the three children?

You have nine marbles that are identical in every respect, except exactly one marble is a slightly different weight than the others. The others are identical in weight. The weight difference is very small. You have a balancing scale, but are limited to two or less measurements. In two or less measurements, determine exactly which marble is different in weight from the rest.

uestion (posed by interviewer): You are consulting for the manager of a division of a large consumer products company. Her division produces fruit juices in three forms, all marketed under the same name: chilled (found in the milk section of usually), juice boxes, and frozen concentrate. This division has sales of $600 million per year. The entire company has sales of over $20 billion. The chilled segment represents $120 million in sales per year. While juice boxes e profitable, chilled juices are only breaking even in good quarters and losing money in bad quarters. She has received a proposal from upper management to sell the chilled juices business. What would you

Information to be given if asked:

Page 46 The philosopher's third clue: "The sum of the three children's ages is identical to the address of the house mathematician still remembered the The philosopher then gave his fourth clue: "The oldest child looks able to determine the ages of the

es of the three children?

You have nine marbles that are identical in every respect, except exactly one than the others. The others are identical in l. You have a balancing scale, but you are limited to two or less measurements. In two or less measurements, determine

You are consulting for the manager of a division juices in three forms, all marketed under the same name: chilled (found in the milk section of usually), juice boxes, and frozen concentrate. This division has has sales of over $20 billion. The chilled segment represents $120 million in sales per year. While juice boxes e profitable, chilled juices are only breaking even in quarters. She has received a proposal from upper management to sell the chilled juices business. What would you

2014 SPJIMR Consulting Casebook

Market/Competitors

__ Chilled beverages are a $5 billion dollar industry nationwide.

__ The two largest players that have 40% and 25% of the market, respectively.

__ Your client’s market share, 12%, makes her third in the industry.

__ The best available information indicates that the two market leaders are profitable.

__ The two market leaders are able to fund more advertising and more promotion, trade and couponing that your

Product

__ The market leaders produce pure orange juice and blends that on citrus juices.

__ Your product uses more elaborate blends of juices, usually with a base of pear or peach juice (95% of the

bananas, mangoes, etc. (the other 5% of the inputs). Pear and peach juice are about the same price as orange juice, but the other flavorings cost about twice as much.

Consumers

__ The market for chilled juices is essentially mothers with school age children. This is a highly price sensitive

promotions, etc.

__ Brand name is important in this market, as in juice boxes and frozen concentrate, as mothers tend to prefer

children. However, the brand premium must be in line with other branded products. Therefore, all branded juic

Operations

__ One plant in California produces all of the products; chilled, juice boxes and frozen. It would be difficult to

major conversion. Solution:

__ Chilled beverages are a $5 billion dollar industry nationwide.

__ The two largest players that have 40% and 25% of the market, __ Your client’s market share, 12%, makes her third in the industry.

information indicates that the two market leaders are __ The two market leaders are able to fund more advertising and more promotion, trade and couponing that your client.

__ The market leaders produce pure orange juice and blends that

__ Your product uses more elaborate blends of juices, usually with a base of pear or peach juice (95% of the inputs) and flavored with cranberries, bananas, mangoes, etc. (the other 5% of the inputs). Pear and peach juice

bout the same price as orange juice, but the other flavorings cost

__ The market for chilled juices is essentially mothers with school age children. This is a highly price sensitive market that loves coupons, __ Brand name is important in this market, as in juice boxes and frozen concentrate, as mothers tend to prefer highly reliable products for their children. However, the brand premium must be in line with other branded products. Therefore, all branded juices tend to sell in the same price range. __ One plant in California produces all of the products; chilled, juice boxes and frozen. It would be difficult to find another use for the plant without a

Page 47 __ Chilled beverages are a $5 billion dollar industry nationwide.

__ The two largest players that have 40% and 25% of the market, __ Your client’s market share, 12%, makes her third in the industry.

information indicates that the two market leaders are __ The two market leaders are able to fund more advertising and more

__ The market leaders produce pure orange juice and blends that are based __ Your product uses more elaborate blends of juices, usually with a base of inputs) and flavored with cranberries, bananas, mangoes, etc. (the other 5% of the inputs). Pear and peach juice bout the same price as orange juice, but the other flavorings cost

__ The market for chilled juices is essentially mothers with school age market that loves coupons, __ Brand name is important in this market, as in juice boxes and frozen highly reliable products for their children. However, the brand premium must be in line with other branded es tend to sell in the same price range. __ One plant in California produces all of the products; chilled, juice boxes

2014 SPJIMR Consulting Casebook There are three choices:

1) Sell the chilled juice business. This would, however, affect the juice and frozen concentrate businesses, as there

manufacturing synergies.

2) Sell all of the juice business. This may be more feasible, as the buyer could capture the synergies, but would not

business around. The selling price is likely to be low.

3) Keep the chilled juice business and rework the ingredients and costs. This turns out to be the most feasible

competitors.