Business Case A

Version A
Case 1: Flour & Pasta
Case 2: TravelCo
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 Case 1

Flour & Pasta

•SAO •BC A (MNO) Version A

 Flour & Pasta case overview

Situation overview
• F&P is a 50 year old consumer products company, with revenues of R$1,2B in
2008
• F&P’s addressable market comprises:
- Domestic users (no B2B trading is performed)
- The Northeast, Southeast, and South regions in Brazil

• F&P sells 5 categories of food products:

- 3 main categories: Flour, Pasta and Cake mix*
- 2 marginal categories: Biscuits and Baking soda

• F&P hired Bain to help them assess which categories they should invest in, and
which categories they should leave
- In spite of that, they have already made heavy investments in marketing, focusing in
the pasta category
- Market analysis indicate that this will make their revenues grow 5% above market
average in 2009, in each region

*Cake mix is a mixture of flour, sugar, baking soda, used to make cakes more easily at home
•SAO •BC A (MNO) Version A
 Graph 1 – Pasta market breakdown, by region
in Brazil, and by player
PASTA
Market value breakdown
2008
R$M, 2008
865 1,800 389 Total = 3,054
100%

80

Pasta di Puglia
60 Pasta di Milano

49% Pasta di Roma

40 Pasta di Napoli

Pasta di Nonna
20 Pasta di Mamma
21%

10% F&P
0
NE S SE
Market average
price (R$/kg) 2.47 3.00 2.49
F&P value share*
Expected market value in Brazil as a
growth 2008-2009 20% 15% 0%
whole: 18%
* Value share = Revenues of a certain brand or company (R$M) / Sum of revenues of all the players in the market (R$M)
Source: Market research; Bain analysis Version A
•SAO •BC A (MNO)
 Graph 2 – Pasta volume and price distribution,
by each brand of each player, in the SE region
2 of F&P’s brands have PASTA
Price index* very similar pricing and SOUTHEAST
%, 2008 volume share
2008
200%
Pasta di Roma's tricolori
Pasta di Napoli's tricolori
Pasta di Nonna's tricolori
150 F&P's green Pasta di Mamma's tricolori
F&P's red

100
Pasta di Milano's tricolori

50 F&P's blue

R$50M
Pasta di Puglia's tricolori Revenues

0
25 35
0 10 20 30 40 50%

Volume share** F&P

%, 2008
Competitors
* Price index = Price of a certain brand or company (R$/kg) / Average price of the whole market (R$/kg)
** Volume share = Volume of a certain brand or company (k ton) / Volume of the whole market (k ton)
Source: Market research; Bain analysis
•SAO •BC A (MNO) Version A
 Graph 3 – Flour price premiumness, by each
brand of each player, in the SE region
FLOUR
Price SOUTHEAST
R$/kg, 2008
2008
3.00

2.50

F&P's average
2.00 price 2,13
2.00
Market* average
price 1,81
1.50

1.00
1.00

F&P
Competitors
0.00
F&P's white Great's yummy Good's flour #1 F&P's Great's Fair's
grey dusty domestic
flour

Volume (k ton) 60 50 60 20 10 10 Volume

k ton
* Refers to the whole market, i.e. it includes F&P as well
Source: Market research; Bain analysis
•SAO •BC A (MNO) Version A
 Graph 4 – Flour volume and price breakdown by
player over time
FLOUR
Volume Price BRAZIL
k ton R$/kg
620 635 650
100% 2.00
60 55 50
1.80
1.70 1.75 F&P
100 1.60
80 1.55 1.58
150 Great flour
200 1.50 1.46
Good flour
1.35

200 1.20
60
150
100 1.00
0.84
0.75 Fair flour
40 0.70

300 Fair flour 0.50

20 260 280
Good flour
Great flour
F&P
0 0.00
2006 2007 2008 2006 2007 2008

Source: Market research; Bain analysis

•SAO •BC A (MNO) Version A
 Graph 5 – Flour, cake mix and ready-to-eat
cake markets expected behavior
Value CAKE MIX
€B EUROPE

ILLUSTRATIVE

Ready-to-eat
cake

Cake mix

Flour

Past Future

People tend to buy food products that take less time

to be prepared, as soon as they can afford them
Source: Bain experience center
•SAO •BC A (MNO) Version A
 Graph 6 – F&P’s product portfolio in the market
attractiveness vs ability to win matrix
2008

BRAZIL
growing market
Big and/or

Cake mix
Market attractiveness

Baking soda
High

Pasta
Biscuits
shrinking market

Flour
Small and/or
Low

R$300M
Revenue

Niche position Follower Market leader

F&P’s market positioning

Source: Market research; Bain analysis
•SAO •BC A (MNO) Version A
Annex 1 – Cake mix’s regional market
breakdown, per company CAKE MIX

Revenues
R$M, 2008 A R$53M
Cakes
Revenues
R$231M, 2008
B
150 made
easy

123 F&P
Cake-2-go
SE
100
S
S
65

50
NE
43
Total NE
R$66M R$112M
112
Cakes Cakes
SE 66 made made
easy
53 easy

0 F&P
F&P Cake-2-go Cakes made easy F&P
Cake-2-go
Cake-2-go

Revenues Revenues
C D
Total = 231
R$M, 2008 R$M, 2008
53 66 112
300 100%
Cakes made easy
112 231 80
Cakes
200 made easy Cake-2-go
60
Cake-2-go
66
40
100
F&P
53 F&P 20

0 0
SE NE S Brazil SE NE S

•SAO •BC A (MNO) Version A

Case 2

TravelCo

•SAO •BC A (MNO) Version A

TravelCo case overview

Situation overview
• TravelCo is the #2 player in the travel packages market in USA, offering
Domestic and International travel packages, Cruises, Bus packages and Airline
Tickets to its customers
• TravelCo is a subsidiary of AirCo, a major airline in the US
• Its main competitors are Nice Travel and Flamingo Tours. Nice Travel is focused
specially in domestic and bus packages, and its customers tend to be more
“low-end” than TravelCo’s
• Nice Travel is a major customer for AirCo, being responsible for about 5% of
AirCo’s revenues
• TravelCo offers a smaller portfolio of products than Nice Travel, but due its ties
with AirCo it can offer more flexible products in terms of dates and flights
avaliability

•SAO •BC A (MNO) Version A

 Graph 7 – TravelCo’s revenues breakdown &
gross margins by product
Revenue breakdown -
TravelCo (U$M)

500
464
Gross Margin
4% Product
Y1 – Y5
402
400 6% 20%
368 Bus 15%
8%
20% 4%
308 Air Tickets 30%
300 19%
9% 4%
255 26% Cruises 40%
20%
4% Bus
12% 20%
16% Air Tickets
4%
200 20% 8% Promo-Packs 8%
4% 15%
13% Cruises
2% 16%
16%
16% Promo-Packs Long Haul* 70%
100 LongHaul
37% 35% 32% Domestic 50%
47% 42% Domestic

0
Y1 Y2 Y3 Y4 Y5

Note: Long Haul = Any destination other than USA, Canada and Mexico; Air Ticket = Tickets sold without
hotels and other tour package products •SAO •BC A (MNO) Version A
 Graph 8 – Estimated market size of new
products and channels costs
Expected market size
CAGR
(Y5-Y7 )
$800M
700 Other
Sales
Channel direct
commission
150 Group travel 22% costs
600 560

120 Internet 0% 10%

450
250
400 100 Eco-tourism 29%
170
Stores 12% 15%
150
200
Train tickets 22%
270 300 Call
5% 10%
200 Center

0
Y5 Y6 Y7

•SAO •BC A (MNO) Version A

Graph 9 –Domestic Packages ROS / RMS (Y5)

Return on Sales

80%

TravelCo
60 Super

Nice Travel
Flamingo
40

Cool
20
$150M
Sales
Y5
0
0.1 0.2 0.3 0.4 0.5 0.6 1 1.7 2 4

Relative Market Share

•SAO •BC A (MNO) Version A

Graph 10 – TravelCo growth/share matrix

Future Market Growth Rate

(Expected)

30.0%

Cruises
LongHaul
20.0

Promo

10.0
Domestic

Air
Tickets
0.0
$100M
Bus Sales
Y5
-10.0
100 50 20 10 5 2 1 0.5 0.2 0.1

Relative Market Share

•SAO •BC A (MNO) Version A

Graph 11 – Long Haul packs evolution

Number of LongHaul packages sold ('000) Currency rate

40 3.0
37

2.4 2.4
30
30
2.0
25 25 2.0
2.0
20 1.4
20

1.0
Currency rate
10 (EURxUSD)
LongHaul
packages
0 0.0
Y1 Y2 Y3 Y4 Y5

Number of
30 40 45 45 52
stores

•SAO •BC A (MNO) Version A

Graph 12 – Customer segmentation & market
growth per customer group
Market Segmentation Expected Market Growth
per Customer Group per Customer Segment

100% 10%
10% 10% 10%
Lux
10% 8%
80 20% 20% 8% Mid
10%
7% 7%
10% 10% Econo
60 20% 6% 6% 6%
10% 6%
Others 5%
30%
40 Cool
30% 30%
4%
Super 4%
Flamingo 3% 3% 3% 3% 3%
20
30% 10% Nice Travel 2%
20% 2%
10% TravelCo
0
ce

y
ic

0
ur
om

ri

x
-P

Y6 Y7 Y8 Y9 Y10
Lu
on

id
Ec

Average
10% 12% 16%
Profitability

•SAO •BC A (MNO) Version A

Annex 2 – Use and preference of sales channels
per market segment
Use and preferece of channels per
segment A Use and preferece of channels per segment B
100% 80%
7070
0.1
80 0.4 0.4
0.7 0.3 60 55
0.5 0.3 50 50
0.2
60
40 40
40 35
40 30 3030
0.2
0.6 0.5 20 20 20
0.7 0.3 20
20 0.4 0.2 10 10 1010
0.1
Preference Use
Use Preference
0 0
I S C I S C I S C I S C I S C I S C
Economic Mid-Price Luxury Economic Mid-Price Luxury

Use and preferece of channels per segment

C Use and preferece of channels per segment
D
150% 140 80%

0.7

60
0.6
100 95 90 0.5 0.5
85
0.4 0.4
40
0.4
60 0.3 0.3
50
50 0.2 0.2
30 30 20
0.2
20 Preference 0.1 Preference
0.1 0.1
Use Use
0 0
I S C I S C I S C I S C I S C I S C

Economic Mid-Price Luxury Economic Mid-Price Luxury

I= Internet; S=Stores; C=Call Center •SAO •BC A (MNO) Version A