⏵ Founded in the early part of the 19th century,

Cafes Monte Bianco is a manufacturer and

Distributor of Premium Coffee, throughout
Europe

⏵ Known for its “premium” quality standards

and taste
⏵
Grow business aggressively

⏵ Consideration of private brand manufacturing and

selling

⏵ Stable performance for the year 2000 because of

manufacturing and selling private brands

⏵ Projection of financial health of the business

considering private and premium brand
manufacturing
Sales are volatile particularly in Sales are relatively stable
times of economic downturn
Margin is relatively high Low margin

DSO is relatively low resulting Cash flow is hurt when payments

in healthy cash flow are delayed by the retailers

Production is planned to meet Production is kept to meet contract

market demand requirements, stability of demand
allows the company to use full
capacity of production

Cannot stock premium coffee due Simplifies Manufacturing plan as

to concerns of freshness inventory can be maintained
easily

Heavy R&D and marketing Reduced administrative, R&D and

expenditures are incurred to meet selling costs (in particular
sales targets marketing costs)
⏵ Current ratio = 0.57
⏵ Quick ratio = 0.41
⏵ Fixed Asset Turnover = 1.86
⏵ Total Asset Turnover = 1.26
Inventory turnover ratio = 11.43
⏵
Days Sales Outstanding = 61 days
⏵
⏵ Higher liabilities, poor
liquidity
⏵ Indicating lower quality of
Accounts Receivables
⏵ Reason being private brand
retailers delayed payments
up to 90 days, reducing
cash flow into the company
⏵ Debt Ratio = 0.79 ⏵ Much of this company’s
financing is in form of debt

⏵ Debt-to-Equity Ratio = 3.87 ⏵ Company owes $3.87 in

debt for every $1 in equity

⏵ Times Interest Earned = 1.85 ⏵ More borrowing prospects

are not feasible
 Café Monte Bianco
Income Statement
For the Year Ended Dec 31, 2001

Sales (6,000,000 kg @ 8,800) Private Brand 52,800,000,000

Cost of Goods Sold

Raw Materials & Labor @ 6,600 39,600,000,000
Fixed Costs 3,319,500,000

Total Cost of Goods Sold 42,919,500,000

Gross Profit 9,880,500,000

Marketing / Advertising Expenses ZERO

R&D Expense (Down by 75%) 832,032,500
Selling Expense (Down by 65%) 1,251,148,500
Admin Expense (Down by 50%) 2,376,000,000
Interest Expense (Constant at 25 billion Liras) 3,825,000,000

Profit Before Tax 1,596,319,000

Tax @ 40% 638,527,600
Profit After Tax 957,791,400
 Brand Year 2000 Revenue Quantity Price Per
Unit
PRIVATE Revenue/Quantity 9,934,848,000 1,152,000 $8,624
PREMIUM Revenue/Quantity 46,177,560,000 1,196,000 $38,610
 Café Monte Bianco
Projected Cash
Flows For the Year
2001
Jan Feb Mar Apr May Jun
Opening Balance 1,121,450,000 4,136,804,905 1,511,504,129 (1,123,731,494) (947,324,877) (25,382,261)
Payment Received
Private 1,301,465,088 1,202,116,608 1,192,181,760 3,673,824,000 4,656,960,000 6,105,792,000
Premium 5,541,307,200 - - - - -

Add: Depreciation 216,141,667 216,141,667 216,141,667 216,141,667 216,141,667 216,141,667

Less: Disbursements
Raw Material/Labor 3,300,000,000 3,300,000,000 3,300,000,000 2,970,000,000 3,207,600,000 2,574,000,000
R&D Expense 69,336,042 69,336,042 69,336,042 69,336,042 69,336,042 69,336,042
Selling Expense 104,262,375 104,262,375 104,262,375 104,262,375 104,262,375 104,262,375
Interest Expense 318,750,000 318,750,000 318,750,000 318,750,000 318,750,000 318,750,000
Admin Expense 198,000,000 198,000,000 198,000,000 198,000,000 198,000,000 198,000,000

Taxes 53,210,633 53,210,633 53,210,633 53,210,633 53,210,633 53,210,633

Closing Balance 4,136,804,905 1,511,504,129 (1,123,731,494) (947,324,877) (25,382,261) 2,978,992,356
 Café Monte Bianco

Projected Cash Flows

For the Year Ended
2001
Jul Aug Sep Oct Nov Dec
Opening Balance 2,978,992,356 3,032,374,973 3,396,221,589 2,156,004,206 501,834,823 (1,618,030,561)
Payment Received
Private 3,880,800,000 4,191,264,000 2,587,200,000 2,173,248,000 1,707,552,000 3,518,592,000
Premium - - - - - -
Add: Depreciation 216,141,667 216,141,667 216,141,667 216,141,667 216,141,667 216,141,667
Less: Disbursements
Raw Material/Labor 3,300,000,000 3,300,000,000 3,300,000,000 3,300,000,000 3,300,000,000 3,300,000,000
R&D Expense 69,336,042 69,336,042 69,336,042 69,336,042 69,336,042 69,336,042
Selling Expense 104,262,375 104,262,375 104,262,375 104,262,375 104,262,375 104,262,375
Interest Expense 318,750,000 318,750,000 318,750,000 318,750,000 318,750,000 318,750,000
Admin Expense 198,000,000 198,000,000 198,000,000 198,000,000 198,000,000 198,000,000
Taxes 53,210,633 53,210,633 53,210,633 53,210,633 53,210,633 53,210,633

Closing Balance 3,032,374,973 3,396,221,589 2,156,004,206 501,834,823 (1,618,030,561) (1,926,855,944)

⏵
For Premium Brand (Year 2000)
= Gross Profit / Sales * 100
= 22,878 / 56,112 * 100
= 40.77%

⏵ For Private Brand (Year 2001)

= Gross Profit / Sales * 100
= 9,880 / 52,800 * 100
= 18.71%
➢
 Grade D C B BB A AA AAA
Selling Price 8,800 19,500 26,600 30,000 35,500 39,000 42,600
Variable Cost 6,600 12,485 14,275 16,288 17,791 19,166 20,441
Contribution 2,200 7,015 12,325 13,712 17,709 19,834 22,159

bCroanntdrib(Du)tion Margin is the lowest for

private

⏵ 2 nd
lowest CM is at least 3 times greater than
the CM for private brand
⏵

ROE = Net Income / Shareholders Equity

⏵ ROE (2000) = 1,945 / 9,165 = 21.2 %

⏵ ROE (2001) = 958 / 9,165 = 10.45 %

⏵ The ROE on the premium brand is twice the

return earned on private brand.

⏵
Café Monte Bianco should opt for premium brand or a mixture
of private and premium

⏵ A major chunk of sales should come from premium brand

⏵
The Gross Profit Margin on premium brand is much higher

⏵ The CM on premium brand is higher

⏵ A complete shift to private brand will have negative impact on

cash flows

⏵ Payment is received after 90 days

⏵ ROE on premium brand is twice the ROE earned on private brand

5/25/2018 Cafe Monte Bianco - slidepdf.com

http://slidepdf.com/reader/full/cafe-monte-bianco 21/21