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Ernst & Young “Business Leaders of Tomorrow” Case Contest

Bigg Glowbell (BG) Case Study


Table of Contents
Table of Contents ................................................................................................................................................ 1
Assignment Background .................................................................................................................................. 2
Bigg-Glowbell Overview ...................................................................................................................................... 3
The Company History ...................................................................................................................................... 3
Revenue and Profits ........................................................................................................................................ 5
Bigg-Glowbell Global Locations ....................................................................................................................... 6
Bigg-Glowbell Organization, Products and Services ........................................................................................ 7
Ownership ..................................................................................................................................................... 14
Strategic Issues .............................................................................................................................................. 14
Organization Structure .................................................................................................................................. 15
Example IT Architecture ................................................................................................................................ 18
Headcount and payroll data .......................................................................................................................... 19
Financials ....................................................................................................................................................... 20
Benchmark data ............................................................................................................................................ 22
Key personalities ............................................................................................................................................... 23
At Bigg-Glowbell Group level ........................................................................................................................ 24
At Bigg-Glowbell Regional/Country level ...................................................................................................... 30

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Ernst & Young “Business Leaders of Tomorrow” Case Contest
Bigg Glowbell (BG) Case Study

The organization used in the case study is Bigg-Glowbell (BG), a fictitious multinational conglomerate with
multiple business units. The case study provides sufficient general information about the organization, key
players, history, products and services, organizational structure and business issues facing BG.

Assignment Background
You have been engaged by Bigg-Glowbell to perform a number of rapid assessments of the functional areas
listed below for the EMEA (Europe, Middle East and Africa) region, and to make recommendations for
improvements:
Sales and marketing IT

Supply Chain
Finance
This request follows the replacement of John Bigg as CFO after a steady decline in both profit and market
capitalization over the last two years. John’s departure was imminent at the end of the last financial year,
when material adjustments to profit were made during the audit of the accounts. The announcement
resulted in a 20% decline in shareholder value overnight. There’s now a broad recognition that things have
to change.

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Bigg Glowbell (BG) Case Study

Bigg-Glowbell Overview

The Company History


As you probably know, Bigg-Glowbell (BG) is one of the largest drinks and beverages companies in the world.
It is a market-focused company and prides itself on being responsive to customers’ needs. Its philosophy is,
“The customer is king.” BG started as a small, family-owned company and has grown into a major global
corporation. Here are BG’s historical milestones:

1896 8 May 1896: Bigg-Glowbell is incorporated, based on Arthur Bigg and


Isaac Glowbell’s Herbal Elixir recipe. They plan to manufacture and sell
it on a commercial scale. The Bigg family had branches on the east
coast of the U.S. and in England.

1897 The first commercial-scale production of Herbal Elixir begins in Eureka, Nevada, after
complaints from the neighbors persuade the family that the basement in their brownstone
was unsuitable for commercial operations.

1903 Arthur and Isaac institute a profit-sharing plan with employees.

1904 BG establishes its own traveling sales force based on commission.

1908 BG expands into other beverages, based on local fruit recipes.

1919 There is strong growth from the core product. BG expands internationally and opens a
facility in Canada.

1922 BG opens a second factory in Newcastle, England.

1928 BG goes public. A share flotation is moderately successful but BG is dominated by the two
families.

1929 BG employs its first female manager, Gwendoline Grimes. She takes on
the innovative role of selling products to continental Europe.

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1939-1945 During World War II , Herbal Elixir, made with rum or whiskey, becomes a popular drink
with the troops. Its mildly addictive qualities establish the foundations for post-war market
penetration.

1955 BG starts a period of acquiring other drinks and beverage companies.

1965 The Bigg family buys out the Glowbells’ shares. The resulting legal
battles concerning intellectual property rights over the recipes racks up
3 million monetary units in legal fees and immense animosity between
the families. The legal judgment favors the Biggs, and George Bigg II
assumes the role of CEO.

1969 Apollo 11 lands on the moon.

1971 The Bigg family loses overall control of the company to institutional shareholders. James A.
White takes over as chairman, but the family retains a significant shareholding. George
Bigg II retains his post as CEO. George announces he will sell his shares upon retirement.

1972 George Bigg III is appointed CEO.

1973 Another period of acquisition begins. BG expands into new areas such as logistics pubs in
England, restaurants and hotels. This strategy continues into the 1980s.

1994-2000 A few more acquisitions and a small amount of consolidation occur.

2000-present As sales growth fails to deliver profit expectations, the new millennium brings increasing
pressure from shareholders. Rumors of hostile takeovers from rivals persist. An article in
the City Journal suggests that BG could be worth more if it were broken up.

BG remains a dominant player in the drinks and beverage market. The family retains a
shareholding in the company, and until very recently John Bigg was the CFO. John still
works for BG as a “consultant.”

A period of declining profitability and poor share price performance was followed by a
high-profile series of material adjustments to the accounts during the audit by Ocean &
Sky (O&S). Share price declined by 20% overnight as a result. John Bigg was removed as
CFO and replaced by Sarah Goldman. Sarah joined BG last month after being the CFO of
Turnaround Holdings, where she led a series of acquisitions and post-merger
consolidations during the mid- to late ’90s.

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Revenue and Profits

mu Company performance
Market cap
7,000
(14,000)

6,000
Bigg-Glowbell Revenue
(12,000)
Values in brackets reflect market cap values.

5,000 2005
(10,000)

4,000
(8,000)

1960
3,000
(6,000)

Goes public
1928
2,000
(4,000)

1940
Profit
1,000
(2,000)

1896
1930 1940 1950 1960 1970 1980 1990 2000 Year
Note: The values used are in today’s values.

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Bigg Glowbell (BG) Case Study

Bigg-Glowbell Global Locations


Currently, BG operates in North America (NAR), Asia-Pacific (APAC), Europe, Middle East and Africa (EMEA),
and Central America and Latin America (CALA).
The company has ambitious plans to expand into China, India and Eastern European countries such as
Slovenia, Romania, Russia and Albania.

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Bigg Glowbell (BG) Case Study

Bigg-Glowbell Organization, Products and Services


BG organizes itself in a matrix by geography and division (see below). The market-facing (geography)
component is strong, and the countries have a lot of autonomy in what they do.

Bigg-
Glowbell

GEOGRAPHY: APAC
Drinks Packaging Logistics IT Services
Division Division Division Division
GEOGRAPHY: EMEA

S&M OPS GEOGRAPHY: Americas

The organizational structure of the company is not fully aligned to the business structure above. Each
region has a regional director. The board structure includes the regional directors, the CEO, the CFO, the
vice presidents of marketing, IT, and HR and four non-executive directors.
Finance within the regions reports to the MD, with a dotted-line report to the CFO (see organization
chart).

The Drinks Division — “Winning through service and innovation”

History and Background


The Drinks division manufactures a wide range of alcoholic and non-alcoholic drinks, as well as the
traditional Herbal Elixir. The division has grown through a combination of organic growth and acquisition. It
owns a small UK chain of pub/restaurants called The Strange Stork and a few leisure centers and country
hotels acquired from a customer in financial difficulty.

Sales and Marketing


The Drinks division manufactures and markets drinks within three distribution channels:

Retail (includes supermarkets, small grocery stores and non-BG-owned restaurants, pubs and leisure
facilities)
The Strange Stork chain of BG-owned pubs and restaurants

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Vending machines operated under a franchise and leasing arrangement


In addition to marketing and distributing its own products, the Drinks division sells and markets third-party
products which complement its own product range. This third-party arrangement is with suppliers that have
a small presence in a particular BG drinks BU market.
The product range for non-alcoholic drinks consists of third-party brands and BG brands. The formula is
almost identical, but the BG brand is normally in better packaging and commands a 20% price premium.
The product range is as follows:

Carbonates Fruit Juices Mineral Water Alcoholic Drinks Third-Party Products

Herbal Elixir Classic Concentrates Scunthorpe Beer “Old Codger” (a Russian and Polish
Spring product from the vodka
Herbal Elixir Ultra Freshly Squeezed
Carbonated (also acquisition of
New Zealand wine
Herbal Elixir Citron sold with citron Sidebottom & Sons
Twist or fruit-twist Yorkshire Cambodian sake

Herbal Elixir Tonic variants) microbrewery and Czech and other


(rejuvenation for the pub chain) Eastern European
Scunthorpe
over-60 population) Springs Still Alcopops (marketed beers

Fruitco Elixir (orange, under the Whizz Australian and


lemon, raspberry and brand) Chinese beer
black currant)

Sold in bottles and in Sold in bottles, jars Sold in plastic and Sold in cans and bottles Sold as part of joint
cans in three sizes: and cartons (B-pak) glass bottles in venture projects
standard, large and three sizes: mainly, but not
family standard, large and exclusively, in the US
family and UK

Drinks Operations
Bottling occurs close to the market and is done by a BG plant where sufficient volume exists. Bottling is
outsourced in smaller markets. In overall volume, BG bottles 80 percent of its own products.
All distribution is undertaken by the BG division on a cost-plus basis. Transactions are billed and settled on a
per-shipment basis through the appropriate local Office of Bookkeeping and Reconciliation (OBKR)
departments.

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Joint ventures with third parties are managed and accounted for against a series of call-off contracts and
profit-sharing arrangements negotiated locally by Marketing.
The Operations division also owns the procurement process, planning and manufacturing, and acts as an
interface to the Logistics division. The function considers itself the pivotal player in delivering customer
service and responding to requests from Marketing. A combination of BG’s over-complex product range, a
desire to be responsive to customers and a lack of effective demand planning contribute to periodic
manufacturing issues, including long product runs to keep change-overs to a minimum and short product
runs to meet unforeseen customer demand. This creates frequent and conflicting problems. Typically, some
parts of the BG supply chain will have too much inventory while others will run out. In situations where
marketing demands cannot be met, the work is outsourced to third parties who have been carefully selected
based on quality, not price.
The Operations and Finance functions do not see eye to eye. In the past, George III frequently reprimanded
John Bigg for the obstinacy and intransigence of Finance. There is little visibility regarding cost, and collecting
data for reporting is difficult.
The complexity of the operations leads to issues concerning performance reporting. Essentially, the process
operates on a day-to-day basis with little apparent planning and few metrics. The master scheduler (Pete
Best) said that they received “loads of complaints,” mainly about shelf life. He said since they were ISO 9000
certified, it was OK because they wrote them down. When being asked what happens then, he responded:
“Nothing, because I just have to fill out a check sheet for the quality manager. Once I’ve done that, I bin
them.”

Packaging Division — “We have packaging wrapped”

History and background


The Packaging division grew out of the acquisition of the Norwegian paper mill company Torsten and
Erickson (T&E) in a piece of classic reverse integration. Originally based on a single mill in Geispojeranger,
Norway, T&E was a major supplier to BG, providing 30% of the global packaging and carton requirements.
T&E was at the leading edge of product development in the area of long-life waterproof cartons. BG
accounted for 80% of T&E sales.
The packaging division also conducts research into canned packaging but outsources the manufacture of
these to third parties under license.
The division recently lost a lucrative opportunity for sole license rights to a new form of beer packaging: the
Helium-Activated Lageriser (HAL). Unfortunately, the inventor (an ex-employee) took the idea to the
competition before the patent was protected. Inadequate mechanisms for protecting intellectual property
were identified by internal audit.
Following a continued period of losses resulting from unrecovered R&D expenditure and rising operating
costs, B&G acquired 100% of T&E shares and injected cash in order to protect supply.

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Current operations
The Packaging division continues to be run by legacy T&E management and has remained largely unchanged
since the acquisition.
Packaging products include:

Corrugated products
Boxes and cartons

T&E was combined into BG in 1987 and now trades as B-pak.


The Packaging division’s systems and processes are now based on a local variant of the Project Universe TRB
rollout. The original TRB template had been based on the US Drinks operating model and has required
significant adaptation and tailoring.
The Packaging division sells products to the Drinks division at a country level using the pre-acquisition
processes and call-off contracts. Invoices are raised and settled by the appropriate OBKR departments.

Logistics — “No road too hard to follow”

History and background


Following quality of service issues in the 1990s that resulted in the temporary loss of the Tulip supermarket
account, BG acquired several mid-sized logistics companies in the US and UK in order to gain full control of
the customer experience. BG merged these companies into a single operating division. Over a five-year
period, the Logistics division expanded its coverage to serve all BG territories.

Current operations
Distribution is divided into long-haul and local. In long-haul, BG owns the trailers and tanks, and the contract
drivers own the tractors. Local distribution consists of employee-driven and -leased smaller trucks and vans.
BG Logistics is at the leading edge of service, guaranteeing next-day delivery to all major clients, thanks to
the Rapid Distribution System (RDS) and the Proactive Warehouse System (PAWS). A significant investment
has been made in RDS and PAWS to support an integrated distribution system linked to the supply chain and
stock management systems of retailers via the Internet. Handheld and onboard computers linked to satellite
navigation systems manage stock levels, routing, and delivery schedules.

X 1200 X 500

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The investment is symbolic of BG’s customer focus and is seen as an extension of the products themselves.
The development of the system was managed by EDT, who worked closely with Marketing, IT, drivers,
warehouse mangers and a representative group of key retailers. The IT department recruited significant in-
house resources to maintain RDS and PAWS. The Logistics division recruited several supply chain consultants
to ensure that continuous improvement kept BG at the leading edge. These consultants, when not working
on internal projects, are deployed externally through the IT division’s consultancy business, called Solve IT.
RDS and PAWS are not integrated with the financial system. Local printouts from these systems are created
weekly and fed into the stock accounting system and sales ledger by OBKR staff. There is a large black hole in
the stock accounting figures.
The division specializes in transporting food-grade liquids. Recently they experienced a nasty incident when a
tanker carrying food-grade phosphoric acid was used to transport Herbal Elixir without having been cleaned.
The result was red Elixir instead of blue. Luckily, the problem was noticed before the product was packaged
and the material was disposed of.

IT Services (Solve IT) — “Daring to go where technology leads”


Born out of the TRB and RDS implementations, the IT division employs between 600 and 900 highly skilled
graduates who earn top salaries. These graduates are divided equally between full-time employees and long-
term contractors. The division, based in the US, UK and Germany, formerly resided in the IT function of BG.
Currently, the division works as a business services operation and recharges its services to the business on a
cost-plus basis. Businesses cannot source the services from other companies and are not too bothered, since
they are not held accountable for the costs.
The history was that in order to avoid any Y2K issues, the company engaged Siegfo to implement a global
TRB system. However, the design of the system was carried out in isolation and with minimal business input.
Things came to a head when the pilot implementation in Holland brought operations to a standstill, resulting
in the loss of an entire season of sales. The situation was so bad that the company had to release its recipes
to third-party manufacturers in an attempt to quell customer anger and satisfy orders. The cost ran into tens
of millions.
Following that disastrous experience, BG continued with an TRB implementation but gave businesses the
largest say in how the system was set up and implemented. The result is a different TRB configuration in
each country. BG expanded the IT division in order to maintain the complex global IT infrastructure and
software.
The IT division also has a consulting business, born out of the knowledge gained by the TRB recovery and the
excellent RDS implementation. Its specialty is ABAP programming, building interfaces between TRB and in-
house systems, and logistics solutions.

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The support functions


The descriptions of the functions below are based on those of BG within the UK, which is the part of the
company we know best. Although there are some local variances in structure and capability, the points
below are broadly applicable across BG.

HR and Payroll — “Where people count”


The HR function owns the payroll, recruitment and benefits processes. Its operational focus is strongly
toward local issues, and it reports into the country BU MD. The focus at a global level is on policy.
The HR function has no self-service technology and only outsources elements of the payroll process. As a
result, it employs large numbers of people to carry out routine transactional processing and is considered
costly compared to competitors’ HR functions. There are frequent errors in the processing of expenses,
recruitment and benefits transactions. It is a constant source of irritation to the business and damaging to
the HR teams’ morale.
There is an annual HR conference to discuss global and local alignment. Also, the function has knowledge-
sharing and support networks.
HR owns the payroll process. The operation process is outsourced to various suppliers (depending on
location), several of whom are costly and inefficient. Travel and expenses are processed internally at the
country BU level. As a consequence, policies vary, and the coding for expense categories varies significantly.
Cost centers are not aligned, and mapping to the chart of accounts is inconsistent.
HR prepares the salary budgets, consolidates them and feeds them through to Finance.

Finance — “Our days are numbers”


As BG has expanded from its UK base, regional Finance functions have tended to follow the same
organizational structure. The structure is based on a decentralized model where the major finance processes
are owned by separate divisions with limited central coordination. This model contributes to a lack of
communications between the Finance teams and some significant inefficiencies.

Procure to Pay
Procurement resides within Operations. The process is characterized by a large number of suppliers with
many different terms and conditions. Operational discipline is poor: 35% of supplier invoices are processed
manually. Goods Received is patchy: 30% of orders have no registered or incorrectly recorded GRN (Goods
Receipt Notification) at the time of the month-end close. There are stock accounting issues, with an
apparent void of some 4.3 million monetary units in the last financial year. There are also significant write-
offs due to obsolete stock (product past its shelf life).

Order to Cash
The process is characterized by complex order terms and conditions including volume discounts, loyalty
rebates and cash incentives to pubs. Most orders are on credit, but some customers operate cash on

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delivery. Twelve percent of invoices raised have credit notes. The most popular reasons for a credit note are
incorrect price (10%) and breakages/returns (9%).
The credit function sits within Sales, not Finance. Its overall performance is poor: Days Sales Outstanding is
running at 75 days.

Record to Report (R2R)


The R2R process has been fraught with issues. In practice, no standard accounting policies are in place, and
there were problems when O&S attempted to audit. Local accounting units regard group accounting policy
as advisory rather than mandatory. Training in group policy has been limited. When group policy is followed,
it is frequently interpreted and applied in a variety of ways, even within the same accounting unit. The ability
to report in both US GAAP and IFRS is poor and leads to significant audit overruns. Last year there were two
material adjustments during the audit on the stock account and the capex account. In the latter case, it was
found that maintenance costs had been incorrectly classified as capital expenditure to the tune of 20 million
monetary units. This led to a 20% drop in share price and became John Bigg’s downfall.
The reporting process relies heavily on spreadsheets. The staff often works late into the night to prepare
monthly and annual reports, causing substantial overtime costs. The quarterly management report can be
up to 145 pages of financials at the regional level. There is little analysis other than actual against budget.

Planning and Budgeting


The planning and budgeting process is regarded as a routine financial ritual and is done for reasons that are
no longer apparent. It is spreadsheet-based and time-consuming. On average, the accuracy of forecasting is
plus or minus 15%. There are few re-forecasts during the course of the financial year. This is usually
explained by reference to customers changing their requirements following a hot or cold spell of weather, so
there is little point trying to forecast accurately. No attempts are being made to improve accuracy.

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Ownership
The current shareholding is as follows:

Employees
12%
Public
23% George Bigg III
5%

Bigg Family
Institutional Investors
35%
25%

Strategic Issues
BG faces multiple issues at a strategic level:
Poor investor reports
High labor costs
High energy costs, affecting distribution and production
Water shortage and quality issues in the UK
In 1903, BG published and patented the Herbal Elixir recipe. The original patent has expired. Although
the company has applied for an extension, it is embroiled in a legal battle with Drink4U, which has
started manufacturing it under its own brand.
The company faces a class-action lawsuit following the discovery of minute traces of amphetamines in
its Rejuvenating Tonic.
Acquisitions have not been optimized and synergies not realized.
Its dual listing on the New York and London creates problems as it struggles to report in both US GAAP
and IFRS.
A close call with SOX compliance

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Organization Structure
An example set of organization charts relevant to the engagements we are currently undertaking for BG is
shown below. They are not exhaustive or uniformly representative of how the company organizes itself
everywhere.

Group Level
(Highlighting Finance function)

Chairman
CEO

Operations and
Logistics Group CFO VP Marketing HR Regional MDs Group CIO
Director

Group
Financial Regional IT
Treasury Tax Drinks Packaging Logistics Divisions
Controller FDs Services

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Divisional Level Finance

Group CFO MD
Group CIO
NEMIA

MD
Regional FD UK
UKand Ireland
& Ireland
level EMEA B-G Group
BG Group

Country Group FD
FD MD
Controller Treasury Tax UK and Ireland
& Ireland UK
UKand Ireland
& Ireland
level BG Group Drinks
B-G Group Drinks Division
Division

FD Country BU
Mgt Acct Fin Acct Controller Treasury Tax UK
UKand Ireland
& Ireland level
Drinks Division
Drinks Division

Mgt Acct Fin Acct Controller Treasury Tax IT

Mgt Acct OBKR

Notes:
The regional level was brought in recently (2000) to transfer power to the regions. The Finance function
has done a better job than the other support functions (particularly sales and marketing) of changing to
the new arrangement, which allows some FDs report to their MDs instead of to Finance.
The Packaging and Logistics divisions do not have operations in every country.

OBKR has some small ‘shared services’ operations in the US, UK and Norway. In general, these do not
perform well and are not cost-effective. In fact, they cost more than when the consolidation occurred.
The company looked at outsourcing these operations to Cloudon, but negotiations broke down. When
the supplier did not guarantee cost savings, no agreement could be reached on the baseline costs and
metrics.

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Procurement organization (EMEA)

Bigg-Glowbell - GROUP

AMERICAS
EMEA Region APAC Region Region

Packaging Logistic IT Division


Drink Division
Division Division … …

OPS M&S … …
OPS M&S Finance HR

Proc.Acct.*
Tax Controller Treasury

Mgt. Acct. Fin Acct. Proc.Acct.**

For Drinks and Packaging divisions:


*The purchasing process is owned by the individual operations.
Both divisions have the same organization structure.
For Logistics and IT divisions:
**The purchasing process is owned by the Finance function and executed by finance accountants.
Both divisions have the same organization structure.
Headcount procurement headcount across EMEA: 15 headcount.

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Example IT Architecture
The lack of system standardization at BG means that no two parts of the business have identical (or in most
cases even similar) IT architectures. The schematic below shows the IT architecture used by BG’s Finance
function in EMEA.

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Headcount and payroll data


BG Headcount & Payrolll Data as at 31 Dec 20XW

FTE by Location
Division Department EMEA APAC Americas Function(s)
Drinks Drinks 8457 5207 6361
IT Services IT 468 0 326 General IT and IT consulting
Logistics Distribution 3174 0 2090
Packaging Packaging 2276 1697 1895
Payroll 35 24 29
Support Functions - HR Recruitment 47 23 52
Benefits 17 8 19
Procurement* 15 15 15 Procurement
General Accounting and Reporting* 227 115 184 Quarterly Reporting and Consolidations
OBKR 521 0 304 Bookkeeping, Reporting, Cash Allocation (UK), Payments to suppliers (UK)
Support Functions - Finance Planning and Budgeting 32 9 17 Planning and Budgetting with little updating and explantions throughout the year.
Tax 24 11 21 Tax planning and reporting
Internal Audit 65 41 81 Internal Audit
Other 82 56 85 Other general accounting functions
NOTES
* These headcount numbers refer to full-time procurement roles. Most procurement in EMEA is done by line personel, so 'hidden' procurement headcount is estimated to be up to 60 FTE.
**For EMEA, includes 50 accountants allocated to consolidations at HQ level.

Payroll Expense By Division in Thousands


Division Department EMEA APAC Americas
Drinks Drinks 354,331 173,627 246,584
IT Services IT 31,142 0 20,461
Logistics Distribution 132,984 0 81,019
Packaging Packaging 95,360 56,586 73,460
Payroll 1,466 800 1,124
Support Functions - HR Recruitment 1,969 767 2,016
Benefits 712 267 737
Procurement 1,380 1,280 1,331
General Accounting and Reporting* 20,881 9,815 16,333
OBKR 47,926 0 26,985
Support Functions - Finance Planning and Budgeting 2,944 768 1,509
Tax 2,208 939 1,864
Internal Audit 5,979 3,499 7,190
Other 7,543 4,779 7,545

Payroll Expense Totals in Thousands


Division Total Payroll Expense
Drinks 774,543
IT Services 51,604
Logistics 214,003
Packaging 225,406
Support Functions - HR 9,858
Support Functions - Finance 172,698

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Financials
Bigg-Glowbell

Financial Statements

Consolidated Balance Sheet at 31 December 200Y

200Y
20XX
20XX
200X
20XW
(thismu
year) (last
muyear)
(this year)

Assets
Non-current assets
Goodwill 2,001 2,258
Brand intangibles 2,602 2,992
Software intangibles 145 112
Property, plant, and equipment 988 1,002
Investment in associates 232 234
Deferred tax assets 11 12
Trade and other receivables 54 52
Other investments 7 8
6,040 6,670
Current assets
Inventories 822 688
Short-term investments 23 20
Trade and other receivables 1,549 1,111
Tax recoverable 30 28
Cash and cash equivalents 287 297
2,711 2,144
Total Assets 8,751 8,814
Liabilities
Current liabilities
Trade and other payables (1,709) (1,612)
Tax payable (277) (167)
Short-term borrowings and overdrafts (752) (638)
Short-term provisions (91) (80)
Obligations under finance leases (24) (24)
(2,853) (2,521)
Non-current liabilities
Trade and other payables (44) (34)
Borrowings (2,344) (2,299)
Retirement benefit obligation (571) (567)
Tax payable (170) (173)
Deferred tax liabilities (752) (744)
Long-term provisions (11) (10)
Obligations under finance leases (52) (50)
(3,944) (3,877)

Total Liabilities (6,797) (6,398)

Net Assets 1,954 2,416


Equity
Share capital 250 250
Share premium account 992 1,025
Other reserves 23 23
Retained earnings 689 1,118
Equity attributable to equity holders of the parent 1,954 2,416
Minority interest - -
Total Equity 1,954 2,416

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Bigg-Glowbell

Financial Statements

Consolidated Income Statement for the year ended 31 December 200Y

20XX
200Y 200X
20XW
(this year) (lastmu
year)
mu
Continuing Operations
Revenue 5,720 5,899
Trading costs (2,796) (2,772)
Selling and distribution costs (1,704) (1,692)
Administrative costs (512) (494)
1) Restructuring costs (9) (13)
2) Amortization and impairment of intangibles (10) (8)
3) Non-trading items (16) (38)
Profit from Operations 673 882
Exceptional item – software costs (35) -
Profit Before Financing and Taxation 638 882
Investment revenue 24 22
Finance costs (20) (17)
Profit Before Taxation 642 887
Taxation (160) (200)
Profit from the Period from Continuing Operations 482 687

Discontinued Operations
Profit for the period from discontinued operations - -
Profit for the Period 482 687
Attributable to:
Equity holders of the parent 482 687
Minority interests - -
482 687
Earnings per share
From continuing and discontinued operations
Basic 32.1p 45.8p
Diluted 26.3p 40.5p

21
Ernst & Young “Business Leaders of Tomorrow” Case Contest
Bigg Glowbell (BG) Case Study

Benchmark data
BG began to buy benchmark data from APQC 12 months ago. They stopped when the business began to
resist being shown unflattering comparisons with competitors and other comparable organizations. This is
why only a limited set of data is available.
Sarah Goldman and Jonathan Stone are both big believers in benchmark data, because if used correctly, the
data creates an incontrovertible case for change.
FINANCE
BG Top Quartile Median Bottom Quartile
Finance Costs as % of Revenue 2.02% 0.3% 0.7% 1.5%
Finance Costs per Finance FTE £ 101,000 £ 46,404 £ 67,469 £ 97,565
Days Sales Outstanding 75 25 35 45
Days to Close 20 3 7* 22

IT
Number of IT FTEs for managing the business of IT per $1 billion revenue 12 4.9 6.3 8.8
Total IT budget as a percentage of revenue 1.5% 0.9 % 1.4 % 1.7 %

Financial ratios compared to competitors


Ratios BG AB CC PP
Current Ratio 0.95 0.81 0.95 1.33
Quick Ratio 0.66 0.51 0.76 1.05
Inventory TO 6.96 13.21 4.48 7.57
ROE 24.67% 49.89% 30.02% 36.64%

* Median number for average days to close for companies with decentralized operations.

22
Ernst & Young “Business Leaders of Tomorrow” Case Contest
Bigg Glowbell (BG) Case Study

Key personalities
There are a number of key individuals at BG you need to know about at the Group level or in the Regions.
The main BG individuals:

Global Team

George Bigg CEO

John Bigg Former CFO

Sarah Goldman CFO

Harold Jerrand Group Financial Accountant

Geoffrey Eccles Group CIO

Pavel Jaworski (PJ) Group VP, Marketing

Eleanor Fitzgerald Group VP, Human Capital

Olivia Merchant Group Director, Strategy & Business Development

Ruby Cutman Group Special Projects

Regional/Country Personnel

Jonathan Stone EMEA Regional Director

Chris Johnson EMEA Finance Director

Sarah Wotherspoon EMEA Sales & Marketing Director

Bob McTavish EMEA Operations Director

Eddie Stobbert EMEA Supply Chain Director

Paul Chapman EMEA IT Director

Divya Gudka North America — Divisional Controller Packaging

Dennis Bittle UK & Ireland — Manager Transactional processing

23
Ernst & Young “Business Leaders of Tomorrow” Case Contest

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