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Recommendation MandateAnalysisFinancialsImplementation Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group Danone must address their current operational challenges before pursuing Option B
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Danone Group: The Kenyan Adventure
Team F:Antoine ChaumeJean-Louis Chen
Lorenzo Cancian-Kavoliunas
Mandate
Mandate Analysis Financials Implementation
Danone group wants to expand and optimize its current operations particularly in Asia-Pacific, Latin America, Middle-
East, Africa (ALMA)
Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group
Recommendation
Mandate Analysis Financials Implementation
Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group
Danone must address their current operational challenges before pursuing Option B
Analysis
Mandate Analysis Financials Implementation
Growth Drivers Kenyan Opportunity
• Population growth• 15 cities with strongest
growth on the planet• 53% sales coming
from emerging markets
• 44 Million residents• High infant mortality• Breeding ground
athletes• Life expectancy 62
years
Danone’s products can be integrated and accepted by the Kenyan market and lifestyle
Analysis
Mandate Analysis Financials Implementation
Decreasing Profitability Reasons for Decrease
• Slowdown in top line growth
• Shrinking Operational and Net Profit Margins
• Decreasing earnings per share
• Operational costs• Raw Materials
• Inflation costs• Currency conversion
Internal problems for Danone need to be addressed
Financials: Operating Inputs and Assumptions
Mandate Analysis Financials Implementation
Main differences are marketing expenses, employees and industrial costs
Financing
• Net Income• Option A:
9.79%• Option B:
4,89%• FCF
• Option A: 8.96%
• Option B: 4.28%
Financials: Revenue Buildup - A
Mandate Analysis Financials Implementation
Consumption in Option A is relatively higher
Financials: Revenue Buildup - B
Mandate Analysis Financials Implementation
Financials: Margins
Mandate Analysis Financials Implementation
Financials: NPV Analysis
Mandate Analysis Financials Implementation
Relatively the same payback period, although B has a lower NPV than Option A
Financials: Danone Group
Mandate Analysis Financials Implementation
Danone cannot ignore its current decline in profitability and must address these issues at hand
Alternatives
Mandate Analysis Financials Implementation
Option A Other Option
• Geopolitical instability• Production safety• Currency Risk
• Penetrate into Kenya by purchasing an existing dairy company
• Ensure operations and strategy in line with Danone
• Less implementation heavy
Both options are viable however risks are difficult to mitigate
Recommendation
Mandate Analysis Financials Implementation
Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group
Danone must address their current operational challenges before pursuing Option B
Implementation
Mandate Analysis Financials Implementation
3-6 Months 1 Year
• Assess operations• Set-up financial
controls to optimize
• Begin operational improvements
• Hedge currencies (swaps)
• Begin expansion into Kenya
Margin improvement crucial, expansion into Kenya to drive sales
2+ Years
• Assess expansion profitability
• Continuously improve supply chain
• Potentially enter into Option A if high profitability
Risks and Mitigations
Mandate Analysis Financials Implementation
Risks Result
• Geopolitical expropriation (war)
• Health care• Demand not met• Currency
• Increase in costs• Financial
instability• Hinder
shareholder value
All risks with Option B can be mitigated somehow
Mitigation
• Partner with government and social initiatives• In line with
Danone’s values
• Hedging Currency
Thank You
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