Continuum CaseStudy Round1

8/10/2019 Continuum CaseStudy Round1

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Mahaajan Beverages is known for being a pioneer in introducing a new trend of carbonated

fruit beverages in India. The company, established in 1993, has grown by leaps and bounds

since its inception. The company intends to provide a healthier alternative to sugary aerated

drinks by manufacturing drinks with real extracts of fruits and a punch of the soda! Located it

in the Western Ghats of Maharashtra, a beautiful mountainous village near Dapoli, is just 20

odd kilometres from the small town.

The CEO of the company Mr. Varun Mahajan , at the launch of the new refreshing taste, Tam

Soda said, Experimenting with the new flavours is my hobby and I personally look into the

new product development. We have a few more flavours in the pipeline to charm your taste

buds. Wait for mo re! The co mpany has a bunch consisting of Lime Soda, Cola, Plain Soda,

Kokum Soda, and Tamarind Soda, the recent addition, but what the company is really known

for is its Kokum Soda. Mr. Mahajan said, We introduced this concept for the first time in the

market that there can be an aerated drink that contains fruit extracts. Kokum, known for its

liver-and-heart-friendly properties, and tamarind for its rich mineral source, when given a

tinge of soda, tastes refreshing! When tourists visit Konkan vicinity during summers, these

thirst quenchers provide them the exact thing they need to conquer the heat.

Demand

The products Kokum Soda and Tam Soda are made from the seasonal fruits. Their demand is

usually high in summers, and this demand is estimated by the current distribution network

the company has (Refer to Exhibit 1). The demand is seasonal, lasting for 4 months viz. March

to June predominantly. However, the minimal sales are met in all the months. The expiry

period offered by the manufacturers is 2 months.


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Process flow

Manufacturing

The company has its factory located at the remote village near Dapoli. These variants have a

similar manufacturing process which includes cleaning of glass bottles, filling the right mix

(controlled by the semi-automatic filling machine), capping and labelling. Cleaning is

performed by a high speed rotatory bottle cleaner and theres a separate semi -automatic

machine for filling and capping. Labelling is done manually. The unit can process 8 bottles per

minute after the machine is fed with desired quantity of the concentrate, water and CO 2. A

500ml of Concentrate is sufficient to produce 50 bottles. Each batch has about 240 bottles

Returned bottles(from retailers)

Glass bottles

Purchase of newbottles (if required)

Cleaning

Filling

Fruit mix/flavour

Capping

Labelling

Storage Dispatch


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doesnt want customers to pay an extra rupee and thus, gives a fixed high margin to its

retailers. It takes 4 days for the batch to reach the retailers.

The company is constantly looking to expand its retailer network and improve on its presence

in the market throughout the season.

Costing

The company uses standard costing approach to address to the costs it incurs. (See Exhibit 2)

Labour

Majority of the labour force is male farmers. The problem it faces is that labour is not

motivated enough to work hard and earn wages. They prefer to stay back home and earn

unemployment compensation by the government. It has been a really difficult task to keep

the labourers motivated and reduce attrition.

Competitors

There are currently only 2 competitors in the market. The manufacturers are spread along the

Konkan region, and each manufacturer has their own region which they monopolize

practically. Having said this, the prices are not determined by the monopolistic conditions as

the well established brands like Pepsi, Coca Cola restrict the prices to at par or slightly higher

than the prices of these brands.


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Exhibit 1

Actual values of annual sales of different products the company has produced last 5 years

Year 2013 2012 2011 2010 2009

Kokum Soda 36000 33600 28800 26400 24000

Tam Soda 960 New product

Cola 1200 1200 960 960 960

Lemon 1200 1200 1200 1200 960

Soda 1200 1200 960 960 960

Exhibit 2

Cost break up of these different products.

Quantity : 200ml Kokum Soda Tam Soda Cola Lemon SodaTotal Variable Cost (Rs.) 5 6 3.5 3.5 3.5

Selling Price (Rs.) 15 15 10 10 10

Total Fixed cost = Rs. 100,000

Manufacturing and Transportation Overheads = Rs. 75,000 (cost driver: no. of batches)

Transportation overheads contribute to about 85% of the total overheads.


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Present your approach to address the following needs of the company

1. The company needs to reduce the costs so that it earns higher profits at the same selling

price

2. It aims to increase the market spread and availability without big-scale advertisements

3. Motivation of labour

4. Any alternate strategy for streamlining the distribution network (if any)

5. Give the cost analysis of implementation of solution the team is providing, and the profit

it is expected to bring to the company (State assumptions explicitly)

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Continuum CaseStudy Round1