Cafe Monte Bianco 5k3l5t
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- Words: 871
- Pages: 21
Hassan Tariq Ghani Syed Saad Shah Syed Muhammad Hamza Syed Ather Waqar Syed Fayyaz Hasnain
Case Presentation ing for Decision Making
Founded in the early part of the 19th century, Cafes Monte Bianco is manufacturer and distributor of Coffee, throughout Europe Known for its “” quality standards and taste
Grow business aggressively Consideration of private brand manufacturing and selling Stable performance for the year 2000 because of manufacturing and selling private brands Projection of financial health of the business considering private and brand manufacturing
Brand
Private Brand
Sales are volatile particularly in times of economic downturn
Sales are relatively stable
Margin is relatively high
Low margin
DSO is relatively low resulting in healthy cash flow
Cash flow is hurt when payments are delayed by the retailers
Production is planned to meet market demand
Production is kept to meet contract requirements, stability of demand allows the company to use full capacity of production
Cannot stock coffee due to concerns of freshness
Simplifies Manufacturing plan as inventory can be maintained easily
Heavy R&D and marketing Reduced istrative, R&D and expenditures are incurred to meet sales selling costs (in particular marketing targets costs)
Income Statement
Balance Sheet
Current ratio = 0.57 Quick ratio = 0.41
Fixed Asset Turnover = 1.86 Total Asset Turnover = 1.26 Inventory turnover ratio = 11.43 Days Sales Outstanding = 61 days
Higher liabilities, poor liquidity
Indicating lower quality of s Receivables Reason being private brand retailers delayed payments up to 90 days, reducing cash flow into the company
Debt Ratio = 0.79
Debt-to-Equity Ratio = 3.87
Times Interest Earned = 1.85
Much of this company’s financing is in form of debt Company owes $3.87 in debt for every $1 in equity More borrowing prospects are not feasible
Advertising Expenditure per Sales Volume
Estimated Cost per Unit for Selling Volume
Sales during 2000
Production Plan for Private Brand
Café Monte Bianco Income Statement For the Year Ended Dec 31, 2001 Sales (6,000,000 kg @ 8,800) Private Brand
52,800,000,000
Cost of Goods Sold Raw Materials & Labor @ 6,600 Fixed Costs
39,600,000,000 3,319,500,000
Total Cost of Goods Sold
42,919,500,000
Gross Profit
9,880,500,000
Marketing / Advertising Expenses R&D Expense (Down by 75%) Selling Expense (Down by 65%) Expense (Down by 50%) Interest Expense (Constant at 25 billion Liras)
ZERO 832,032,500 1,251,148,500 2,376,000,000 3,825,000,000
Profit Before Tax Tax @ 40% Profit After Tax
1,596,319,000 638,527,600 957,791,400
Brand PRIVATE
Year 2000 Revenue Revenue/Quantity 9,934,848,000 Revenue/Quantity 46,177,560,000
Quantity 1,152,000 1,196,000
Price Per Unit $8,624 $38,610
Opening Balance Payment Received Private Add: Depreciation Less: Disbursements Raw Material/Labor R&D Expense Selling Expense Interest Expense Expense Taxes Closing Balance
Jan 1,121,450,000
Café Monte Bianco Projected Cash Flows For the Year 2001 Feb Mar Apr 4,136,804,905 1,511,504,129 (1,123,731,494)
1,301,465,088 5,541,307,200 216,141,667
1,202,116,608 216,141,667
1,192,181,760 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
4,136,804,905
1,511,504,129
May (947,324,877)
Jun (25,382,261)
3,673,824,000 216,141,667
4,656,960,000 216,141,667
6,105,792,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,970,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,207,600,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,574,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
(1,123,731,494)
(947,324,877)
(25,382,261)
2,978,992,356
Opening Balance Payment Received Private Add: Depreciation Less: Disbursements Raw Material/Labor R&D Expense Selling Expense Interest Expense Expense Taxes Closing Balance
Jul 2,978,992,356
Café Monte Bianco Projected Cash Flows For the Year Ended 2001 Aug Sep Oct 3,032,374,973 3,396,221,589 2,156,004,206
3,880,800,000 216,141,667
4,191,264,000 216,141,667
2,587,200,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,032,374,973
3,396,221,589
Nov 501,834,823
Dec (1,618,030,561)
2,173,248,000 216,141,667
1,707,552,000 216,141,667
3,518,592,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,156,004,206
501,834,823
(1,618,030,561)
(1,926,855,944)
For Brand (Year 2000) = Gross Profit / Sales * 100 = 22,878 / 56,112 * 100 = 40.77%
For Private Brand (Year 2001) = Gross Profit / Sales * 100 = 9,880 / 52,800 * 100 = 18.71% Gross Profit Margin in Year 2000 was greater by 22% when compared with GP Margin of 2001
Grade Selling Price Variable Cost Contribution
D 8,800 6,600 2,200
C 19,500 12,485 7,015
B 26,600 14,275 12,325
BB 30,000 16,288 13,712
A 35,500 17,791 17,709
AA 39,000 19,166 19,834
AAA 42,600 20,441 22,159
Contribution Margin is the lowest for private brand (D) 2nd lowest CM is at least 3 times greater than the CM for private brand
ROE = Net Income / Shareholders Equity
ROE (2000) = 1,945 / 9,165 = 21.2 %
ROE (2001) = 958 / 9,165 = 10.45 %
The ROE on the brand is twice the return earned on private brand.
Café Monte Bianco should opt for brand or a mixture of private and A major chunk of sales should come from brand A complete shift to private brand will have negative impact on cash flows due to delay in receivables on the part of retailers By selling brand, Salvetti family will able retain their hard earned position in market.
Q&A
Case Presentation ing for Decision Making
Founded in the early part of the 19th century, Cafes Monte Bianco is manufacturer and distributor of Coffee, throughout Europe Known for its “” quality standards and taste
Grow business aggressively Consideration of private brand manufacturing and selling Stable performance for the year 2000 because of manufacturing and selling private brands Projection of financial health of the business considering private and brand manufacturing
Brand
Private Brand
Sales are volatile particularly in times of economic downturn
Sales are relatively stable
Margin is relatively high
Low margin
DSO is relatively low resulting in healthy cash flow
Cash flow is hurt when payments are delayed by the retailers
Production is planned to meet market demand
Production is kept to meet contract requirements, stability of demand allows the company to use full capacity of production
Cannot stock coffee due to concerns of freshness
Simplifies Manufacturing plan as inventory can be maintained easily
Heavy R&D and marketing Reduced istrative, R&D and expenditures are incurred to meet sales selling costs (in particular marketing targets costs)
Income Statement
Balance Sheet
Current ratio = 0.57 Quick ratio = 0.41
Fixed Asset Turnover = 1.86 Total Asset Turnover = 1.26 Inventory turnover ratio = 11.43 Days Sales Outstanding = 61 days
Higher liabilities, poor liquidity
Indicating lower quality of s Receivables Reason being private brand retailers delayed payments up to 90 days, reducing cash flow into the company
Debt Ratio = 0.79
Debt-to-Equity Ratio = 3.87
Times Interest Earned = 1.85
Much of this company’s financing is in form of debt Company owes $3.87 in debt for every $1 in equity More borrowing prospects are not feasible
Advertising Expenditure per Sales Volume
Estimated Cost per Unit for Selling Volume
Sales during 2000
Production Plan for Private Brand
Café Monte Bianco Income Statement For the Year Ended Dec 31, 2001 Sales (6,000,000 kg @ 8,800) Private Brand
52,800,000,000
Cost of Goods Sold Raw Materials & Labor @ 6,600 Fixed Costs
39,600,000,000 3,319,500,000
Total Cost of Goods Sold
42,919,500,000
Gross Profit
9,880,500,000
Marketing / Advertising Expenses R&D Expense (Down by 75%) Selling Expense (Down by 65%) Expense (Down by 50%) Interest Expense (Constant at 25 billion Liras)
ZERO 832,032,500 1,251,148,500 2,376,000,000 3,825,000,000
Profit Before Tax Tax @ 40% Profit After Tax
1,596,319,000 638,527,600 957,791,400
Brand PRIVATE
Year 2000 Revenue Revenue/Quantity 9,934,848,000 Revenue/Quantity 46,177,560,000
Quantity 1,152,000 1,196,000
Price Per Unit $8,624 $38,610
Opening Balance Payment Received Private Add: Depreciation Less: Disbursements Raw Material/Labor R&D Expense Selling Expense Interest Expense Expense Taxes Closing Balance
Jan 1,121,450,000
Café Monte Bianco Projected Cash Flows For the Year 2001 Feb Mar Apr 4,136,804,905 1,511,504,129 (1,123,731,494)
1,301,465,088 5,541,307,200 216,141,667
1,202,116,608 216,141,667
1,192,181,760 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
4,136,804,905
1,511,504,129
May (947,324,877)
Jun (25,382,261)
3,673,824,000 216,141,667
4,656,960,000 216,141,667
6,105,792,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,970,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,207,600,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,574,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
(1,123,731,494)
(947,324,877)
(25,382,261)
2,978,992,356
Opening Balance Payment Received Private Add: Depreciation Less: Disbursements Raw Material/Labor R&D Expense Selling Expense Interest Expense Expense Taxes Closing Balance
Jul 2,978,992,356
Café Monte Bianco Projected Cash Flows For the Year Ended 2001 Aug Sep Oct 3,032,374,973 3,396,221,589 2,156,004,206
3,880,800,000 216,141,667
4,191,264,000 216,141,667
2,587,200,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,032,374,973
3,396,221,589
Nov 501,834,823
Dec (1,618,030,561)
2,173,248,000 216,141,667
1,707,552,000 216,141,667
3,518,592,000 216,141,667
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
3,300,000,000 69,336,042 104,262,375 318,750,000 198,000,000 53,210,633
2,156,004,206
501,834,823
(1,618,030,561)
(1,926,855,944)
For Brand (Year 2000) = Gross Profit / Sales * 100 = 22,878 / 56,112 * 100 = 40.77%
For Private Brand (Year 2001) = Gross Profit / Sales * 100 = 9,880 / 52,800 * 100 = 18.71% Gross Profit Margin in Year 2000 was greater by 22% when compared with GP Margin of 2001
Grade Selling Price Variable Cost Contribution
D 8,800 6,600 2,200
C 19,500 12,485 7,015
B 26,600 14,275 12,325
BB 30,000 16,288 13,712
A 35,500 17,791 17,709
AA 39,000 19,166 19,834
AAA 42,600 20,441 22,159
Contribution Margin is the lowest for private brand (D) 2nd lowest CM is at least 3 times greater than the CM for private brand
ROE = Net Income / Shareholders Equity
ROE (2000) = 1,945 / 9,165 = 21.2 %
ROE (2001) = 958 / 9,165 = 10.45 %
The ROE on the brand is twice the return earned on private brand.
Café Monte Bianco should opt for brand or a mixture of private and A major chunk of sales should come from brand A complete shift to private brand will have negative impact on cash flows due to delay in receivables on the part of retailers By selling brand, Salvetti family will able retain their hard earned position in market.
Q&A
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