GEP Case Competition 2015

Indian School Of Business, Hyderabad

Team Striker
Pratiksha Daftari
pratiksha_daftari2016@isb.edu

Sushnata Chatterjee
sushnata_chatterjee2016@isb.edu

Current Scenario

Brandbury, a $20Bn company, has four business segments confectionary, beverages, dairy
and biscuits

Cookie Monster, a key product in confectionery segment contributes to around 50% of

annual confectionary revenue and 20% of annual company revenue.

Currently, major inputs in Cookie Monster are cocoa, sugar and peanuts which are sourced
from South America and West Africa and its market is limited to USA

While Cookie Monster is a quality product with good brand recall, its profitability is a concern
for the company.

This is mainly because sales have stagnated as the market has matured in in USA and also
because of the rising prices of its key inputs

The company has a plant in Ohio which operates at its maximum capacity, so any increase in
sales to boost profitability would require expansion in production facility.
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Problems

To boost profitability, Brandbury is considering the following options:

Finding economic sources of input while maintaining the quality of the Cookie Monster.
Explore new markets for the product beyond USA.

To increase profit from Cookie Monster, new markets are to be identified as US market has
been saturated. The possible options are South America or Asia Pacific region as suggested by
a marketing research firm due to the sustainable demand and growth prospect of these two
markets.

The capacity of only plant in Ohio has been exhausted. So to produce more Cookie Monster,
Brandbury must either Expand the Ohio plant or set up new plant.

Brandbury must decide on the following:

Whether to expand in South America or APAC or both
Whether to expand the Ohio facility or to set up new facility
Where should the inputs be sourced from in light of its proximity from production centre.
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Further informations required

1. Cost structure of Cookie Monster including fixed costs and costs of all the raw materials and respective
proportion to produce Cookie Monster. It is required to decide the main drivers of cost and possibilities to
minimise the same.
2. Marketing and branding philosophy of Cookie Monster as well as demography of the target segment for
the product. This is important in order to judge the purchase power and feasible price point of Cookie Monster
in those markets.
3. History of profitability. This will help checking whether the product will be profitable in new markets given the
demographies and competition in the market.
4. The trackable parameters to judge quality for all the raw materials. This will help to choose the correct
source of the raw material.
5. Market size for confectionary biscuits and market share of competitive products for both South America and
APAC markets. This will give an estimation market entry cost and expected market share.
6. Comparison of the estimated costs of setting up and operating the factory and other licensing expenses and
tax structure at that specific country for the possible alternative location of biscuit factory in USA, South America
and APAC region. This will be helpful deciding the breakeven market share.
7. The alternative acceptable quality sources of the raw materials including wheat, cocoa, sugar, peanuts and
any other raw material required with transportation cost to Ohio and other possible location of biscuit factory with
the rating of suppliers and transporters on quality and reliability.

Possible Strategic Moves

The strategy is to combine inexpensive raw materials, proximity of production facility to input
sources and capture the maximum market.

The data requested would help in validating and verifying the following potential moves:

Targeting the South American market for the following advantages:

Proximity to current sources of inputs in Brazil and Argentina

Potential cost savings if production facility, raw material sources and target market are
located close to each other

Alternative sourcing of Cocoa from Brazil or Mexico and even Wheat if feasible

Targeting the Asia Pacific market for the following advantages:

Alternative sourcing of raw materials - wheat (India, China), sugar (India, China), cocoa
(Malaysia) and peanut (India, China)

Lower set up cost of plant and machinery

Potential cost savings if production facility, raw material sources and target market are
located close to each other
Continued

Possible Strategic Moves

Estimates of market demand and growth along with the set up cost of additional
production facility would determine the choice of next target market.

However, a trial launch could be considered before determining long term strategy.

Brandbury could explore if the production for trial launch could be managed from Ohio
facility to save initial capital expenditure before gauging the market potential.

Alternative sources of input have to be selected considering standardisation and quality of

the product in all markets.

Comparing the production costs in USA with that in the new target markets in South
America and Asia Pacific and factoring the additional transportation costs and gains from
economies of scale, Brandbury could explore centralizing its entire production in these
regions with relatively inexpensive labor force.

Brandbury could also review its existing operations and production process to rectify
current cost leakages and making it more cost effective.
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