BCG strategy cup 2010

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Challenge based on 2010 BCG Strategy Cup about Old Spirit Group

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BCG strategy cup 2010

  1. 1. 1OLD SPIRIT GROUP :2010-2025 CHEN YAXI CHOW SHEK YIN CLUZEL THOMAS DAUCHY LOUIS DELAPORTE THOMAS EL ALAMI YOUSSEF 2010 BCG Strategy Cup
  2. 2. Executive summary Looking for growth : roadmap 2010-20252   Four investments needed before 2025 for seven millions euro Investments   Two regular production lines in 2017 in 2024 for two millions euro each   One premium production line in 2023 for two millions euro   One bottling line in 2021 for one million euro Profitability levels Red Peacock Cast Island Dreamalt Margins 12,02% 17,00% 29,30% ROCE 16,29% 14,06% 8,47%   Weak ROCE for luxury product due to high inventories Proposal strategy   Cooperation with Whisky association in France to stimulate the market   Joint-venture with an Indian producer   Optimisation of marketing expense   Launching a new product : Black Phoenix
  3. 3. Old Spirit Group Forecast sales and global market share3 250 A global presence of A bright future the Group in 2009 200 China Total sales for 0% UK 150 mass (k cases) 23% US 36% 100 Total sales for classic (k-cases) France 9% 50 India Total sales for 1% luxuary (k- Spain 0 cases) 31% 2011 2012 2013 2015 2018 2021 2022 2023 2025 2028 2031 2032 2033 2009 2010 2014 2016 2017 2019 2020 2024 2026 2027 2029 2030 In a changing market : new demands and new customers A growing market with a Strong development of Decline of the “mass” segment The explosion of the “luxuary” +3% CAGR in the six China with a CAGR of 18% in mature markets segment : +254% main countries
  4. 4. Heavy investments Four investments needed before 2025 for seven millions euro4 2009 Production lines Regular production100 90 Current capcity: 60MUoA 80 Forecast by 2017 : 61,05 MUoA 70 Total production 2017 60 of regular new Investment in a new regular 50 make spirit production line : 2M€ (MUoA) Extra-capacities : 20MUoA 40 Total production Bottling line 30 of premium new Current capacity : 80MUoA 20 make spirit Forecast by 2021 : 82,21 MUoA 10 (MUoA) 0 2021 Investment in a premium 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 production line : 1M€ Premium production Extra-capacities : 20MUoA Current capacity: 40MUoA120 Bottling lines Forecast by 2023 : 41,00 MUoA100 2023 Investment in a premium production line : 2M€ 80 Extra-capacities : 20MUoA Regular production 60 Current capacity: 80MUoA 40 Total Bottling in MUoA Forecast by 2024 : 80,92 MUoA 20 2024 Investment in a new regular 0 production line : 2M€ Extra-capacities : 20MUoA 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2025
  5. 5. Profitability Margins and ROCE inversely related 5 In € Red Peacock Cast Island Dreamalt Relation between margins and ROCE Sales 5 658 300 12 699 072 1 844 424 0.35 % 28% 63% 9% 0.3 29.3% EBIT 680 235 2 158 382 540 489 0.25 0.2 Net Income 476 165 1 510 867 378 342 17.0% 0.15 Margins 12,02% 17,00% 29,30% 12.0% 0.1 Inventories 1 180 517 7 895 500 4 060 940 0.05 0 Capital employed 2 922 750 10 747 502 4 466 706 0 0.05 0.1 0.15 0.2 ROCE 16,29% 14,06% 8,47% ROCE = net income = net income x sales Impact on Old Spirit Group capital employed sales capital employed   Luxury segment threathens the firm because of the Margins Net asset low net asset turnover : the Group needs to turnover develop a basic product with fast maturation to generate cash   Global ROCE of the firm is dependent of the massLower margins for mass Weak ROCE for luxury segments: segment product which is decreasing globally •  High inventories due to whiskysegments maturation : 6 years   In the luxury market, due to the long ageing of•  High proportion of marketing •  Dreamalt accounts only for 9% of the whisky, the only solution to increase ROCE is toexpense compare to the sales sales for 31% of the inventories in 2009 improve margins (increase prices or lower costs)overhead
  6. 6. Countries strategies6   Maintain the global marketing budget but maximise the effectiveness of marketing expenses   Keep our position in decreasing markets and gain new market shares in emerging ones   Market trend is to consume more   USA has a relatively stable growth   Increase marketing expenses in high quality whisky with a decline of for the mass segment in a declining mass segment based on the the mass market segment along with market decrease market shares of Read our market shares Peackock from 5% to 3% in a   USA will stay the biggest market for   We recommend to focus more on luxury for the next 10 to 15 years segment increasing by 5.7% classic and luxury segments and gradually cutting expenses in mass   We recommend to keep our positions market in this region
  7. 7. Countries strategies7   In a booming market, the mass and   A 2,2 percentage points declines   The most fast growth market for the classic segments underperformed marketing share in a shrink market moment but the absolute numbers is dramatically small   High taxes block the penetration of   Due to the inanition of the market, the Indian market we recommend to set up marketing   We recommend to invest more in   We recommend to establish a joint- activities co-working with Scotch China before the important breaking venture with a domestic producer: Whisky Association to stimulate the point in 2024 when China will sharing industrial know-how and market become the third largest luxury gain access to the Indian market market
  8. 8. New product proposal : Black Phoenix 8   Context   Mass segment isn’t dynamic for the next 15 years apart from Premium spirit India and China   Classic product makes solid profits net income among all three   Classic and luxury are the most attractive segments for the Group Dreamalt for the six current markets   Luxury has the higher growth forecast but ROCE are too low Mass Luxury because of the ageing process   Increase cash constraint pressure Red Peacock Cast Island   Objectives   Increase the liquidity of cash flow to support future luxury growth Regular spirit   Increase market shares in both classic and luxury segments Production factors Objectives by 2020 Black PhoenixRegular line 6 000K Sales 14 286 456 Ageing 4 yearsPremium line 4 000K EBIT 3 571 614 60% premium new make spiritBotteling 3 000K Net income 2 500 129,8 Proportion 40% regular new make spiritTotal 15 000K Margin 25% Price 18€/L Inventories 9 711 464,845 Production Equipment 5 824 528 2011 time Capital employed 15 535 992,85 ROCE 16,09% Launch time 2015
  9. 9. 9THANK YOU FOR YOUR ATTENTIONANY QUESTIONS ?

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