Case Study

Transforming the Business Model of a Commodity Based Food & Beverage Manufacturer

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Client Situation

A publicly traded manufacturer of alcohol and naturally derived specialty ingredients used primarily in food, beverages and household products had for numerous years been primarily a commodity-based business, struggling as commodity market prices and raw materials prices fluctuated wildly. By reviewing and analyzing the business and creating more transparency in the financial reporting system, the senior management team identified the company’s value added products as the major product lines the company should focus on producing, while eliminating the commodity based products from their product offering. This led to the formation of a new long term strategy and execution of the action plans required to transform the business from a commodity based business to a business focused on value added products in order to realize improved, growing earnings and cash flows.

Solution

The company’s CFO, now a E78 partner, coordinated the cross-functional responsibilities between the finance and operations teams that were needed to successfully complete this transformation. Each department was required to re-analyze its standard operating procedures and implement new processes to reflect the transformation to the new business model. The sales organization was restructured from a geographically-based sales force to a technically skilled sales force, which ensured that the salespeople were knowledgeable about the company’s products and greatly improved their ability to close sales with customers. A new detailed costing system was developed by SKU, eliminating products that contributed very low profits, or even losses, and/or products that did not provide a long-term strategic contribution to the new business model. The changes and progress on redefining the business model were accomplished through monthly company newsletters that explained the progress of this strategic re-direction as it developed.

Result

  • The workforce was reduced by 44 percent in one year by consolidating the food ingredients production from two facilities into one, and discontinuing specific operations as well as the production of one of the previous major product lines
  • Once the business transformation was complete, the company’s continuous operations results, before one-time charges, improved by 80% in the following year

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