Bevco-charting the way ahead presentation

1. BEVCO-CHARTING THE WAY FORWARD
SUBMITTED BY-
KRITI DONERIA
ANKITA SHRIVASTAVA

2. EXECUTIVE SUMMARY
Strategic
Assessment
Financial
Assessment
Operational
Assessment
Acquisition price of
BeerCo
-Rate of US beer Market
-Craft Beer segment attractiveness
-Profitability analysis
-BeerCo operating margin
-Operational consideration
-BeerCo Supply change
Analysis factor
Overview  Leading international Wine producer BevCo targets
acquisition of premium craft beer brand BeerCo.
 In Order to understand the market situation and
conduct target analysis, various factors are been
assessed.

3. 54
56
58
60
62
64
66
68
70
2014 2015 2016 2017 2018 2019
Beverage Market Growth rate ($B)
0
10
20
30
40
50
Super
Premium
Craft Import Premium Sub-premium
Beer-Segment wise growth rate
2014 2019
2014 2019 CAGR*
Beverage 59.2 68.2 +2.9%
Beer(overall
)
32.6 33.4 +.5%
Craft Beer 3.4 4.89 +7.63%
Wine 9.5 11.6 +4.1%
Spirits 17.2 23.2 +6,18%
Growth Rate of Beer industry is about 17% of the growth of Beverage market. The beer industry being highly
consolidated has only a few major players controlling more than 70 percent of total volume and hundreds of
smaller players selling to the rest of the market. To diversify revenue streams and broaden its portfolio of
brands, investing the Beer market, particularly Craft beer ,is a perfect choice for BevCo.
+7.63%+1.22% +2.48% -1.3%% -1.8%
*CAGR=[(final value/initial value)^1/(no of

4. Factors to be
considered
when
evaluating the
opportunity
-Broadened product
distribution
-Compete for customers
which originally were not
the clients
-Optimize internal
positions
-Introduce more
responsibilities to the
existing roles
-Process optimization
- Enhanced marketing
tactics and strategies
-Better technologies
-Better tax
benefits
-State support
-Market share
boost
-More effective
distribution
Revenue
and Cost
Synergie
s
5% revenue
growth
10% cost
reduction
0
50
100
150
Sper
premium
Craft Import Sub
Premium
Premium
2014
2019
Sales Volume(barrels in million)

5. Average operating margin is 20% in the craft
beer segment,almost the same as BeerCo. Because of
synergies,it is increased to 28%.
Lager has higher revenue growth than Ale & Stout. Given a
better can price and increased cross-selling through
synergy,operational margin will increase.
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Revenue
COGS
SG&A
EBITDA
Operating Income
Operating Margin
OPERATING MARGINS
Synergy Total BeerCo BevCo
Factors which impact the purchase price of BeerCo
General
market and
economic
conditions
and
outlook
General
Attractiven-
-ess
of the
Company
Financial
Parameters
Relative
negotiation
skill and
bargaining
leverage of
the parties
The buyer’s
experience
with prior
acquisition
s:
The
inherent
risk factors
and the
buyer’s
tolerance for
them
Type of
Buyer

6. Income Based - discover
value of the firm
through its income
metrics
- Provide intrinsic value
- Most detailed & scientific
- Consider time value for
money
- Fails to capture sentiments
- Extremely data intensive
- A forecast of virtue,= an
element of uncertainty
Market based -Capture
market sentiments while
also taking care into account
peer comparison
- Capture market sentiments
- Very quick &easy to apply
- Works best between quarters
- Doesn’t work well for startups
- Tendency to overvalue stock in
bullish market & undervalue in
bearish market
- Sways with market as there’s no
anchor or intrinsic value’
Pros
Cons
Valuation
methods
Assert based -Valuing firm’s
asserts on carry value,
replacement value or liquidation
value basis
- Works best for distress and loss
making companies
- Works best in downturn
- Gives ‘worst case scenario ‘ value
- Fails to capture market
sentiments
- Severely undervalues profit
making companies by not
capturing market sentiment or
business performance
Market approach is a best way for valuing business of BeerCo as it captures the market sentiments more than any other method and
also keeps in account peer comparison .
Exchange of
Talent pool &
earning
People
Labor skills
& availability
IT Integration
Technology
Operational
efficiency
Process
Efficiency
Process
Automation
$2.574
Billion
Target revenue:
$1.1 Billion
Average of
comparable:
2.34X
Operational Consideration Acquisition price of BeerCo

7. Clearly,BevCo should establish its own production facility before annual production hits
700 million by 2016.Given the operational efficiency and benefits from synergies,the
production costs shall further be reduced.

8. 28%
Increased
operating
margin
5% Revenue
growth
&
10% Cost
reduction
Promising
craft Beer
market with
17% growth
rate
Reduced
production
cost after
setting new
production
facility
Attractive
operational
considerations
BevCo should acquire BeerCo so as to
diversify revenue streams and for
portfolio enhancement
Conclusion