KNOW YOUR PRE-SEEN
(KYP)
FIZZZ
MAY 2017 – STRATEGIC CASE STUDY
1
Copyright © 2017 Nanaska.com, All Rights Reserved
‘Flavour’ and ‘Flavoured’ difference
Flavour : A drink can be sold as, say, ‘orange flavour’ if it tastes like
orange juice even if the flavour has been derived from artificial
flavouring
Flavoured : A drink would actually have to contain orange juice in
order to be described as orange ‘flavoured’
12
Copyright © 2017 Nanaska.com, All Rights Reserved
Company Profile
•
•
•
•
•
•
•
•
•
•
Name : Fizz
Nature of the business : Manufactures soft drinks
Location of Head office : Nortland
Fizz is one of the largest manufacturers of soft drinks in
Nortland
Fizz sells “non-alcoholic” soft drinks
Fizz was founded by the Clann Family
Currency of Nortland : N$
Nortland uses International Financial Reporting Standards
Fizz is quoted on the Nortland Stock Exchange since 1962
Main competitor: Qwench
14
Copyright © 2017 Nanaska.com, All Rights Reserved
Company Profile
• All of Fizz’s carbonated drinks and cordials are manufactured at a
single factory
• Functions in the factory include : Canning and bottling facilities
and a distribution centre
• Joocy Juice is made and packaged outside of Nortland
• Gross profit margin for 2016 : 51%
• Operating profit margin for 2016 : 23%
• Net profit margin : 20%
15
Copyright © 2017 Nanaska.com, All Rights Reserved
Fizz was founded by the Clann family…….
• Fizz was founded by the Clann family in 1890
• The company’s first products were marketed as refreshing
tonics that were designed to settle mild stomach upsets and
help invalids to keep themselves hydrated
• The Clann family still holds 18% of the company’s shares
• Several of Fizz’s earliest products are still in production, most
notably Froot, a carbonated soft drink that is very popular in
Nortland and has a growing global market
• Member of the founding family of Clann holds the position of
Chairman (Walter Clann) currently
16
Copyright © 2017 Nanaska.com, All Rights Reserved
Main products of Fizz ctd – Fizz Carbonated
• Fizz sells a range of carbonated drinks,
 Fizz Cola
Fizz Orange
Fizz Cream soda
• These drinks sell steadily through the off-trade sector, but they
aren’t market leaders
• Fizz Carbonated drinks have both regular and sugar free versions
and they contain the same level of caffeine as Froot
20
Copyright © 2017 Nanaska.com, All Rights Reserved
Should Fizz produce alcoholic
drinks?
YES
NO
We could attract a whole new range of Since the founders are still part of Fizz
customers, and this could give our top and also hold 18% of the company’s
line a boost
shares, they might not be happy with
this move as Fizz has been producing
only non-alcoholic drinks since
inception
Beverages with an alcoholic content
are usually priced higher than soft
drinks, this will help us recover
overhead costs
We do not have the experience to
venture into the production of
alcoholic soft drinks
Fizz is already a well known brand
within Nortland, and hence marketing
our alcoholic beverages might not be
a hassle
We will have to get the proper license
from the government of Nortland to
manufacture and sell alcoholic drinks
It will be difficult task to find suppliers
to provide the required alcohol to
make the drink
Copyright © 2017 Nanaska.com, All Rights Reserved
30
Distribution Channels ctd – On trade
• On trade comprises sales to cafes, restaurants, bars and other
outlets
• Final consumers are expected to consume the drinks on the
premises
• Major on trade outlets will buy directly from the manufacturer,
but there are also wholesalers who service the on-trade channel
36
Copyright © 2017 Nanaska.com, All Rights Reserved
Breakdown of Nortland’s overall soft drinks market by retail sales
value – CSD On Trade
•
•
•
•
•
•
•
Cola(39%) – N$ 1,151,280,000
Energy(22%) – N$ 649,440,000
Fruit Flavoured Carbonates (12%) – N$ 354,240,000
Water(14%) – N$ 413,280,000
Lemonade(5%) – N$ 147,600,000
Mixers(4%) – N$ 118,080,000
Other(4%) – N$ 118,080,000
39
Copyright © 2017 Nanaska.com, All Rights Reserved
45
Copyright © 2017 Nanaska.com, All Rights Reserved
Organizational Structure of Fizz
• We have a functional structure, this seems to be reasonable as we
majorly manufacture and sell in one country
• Fizz does not have a legal director, and this could potentially be a gap
in the BOD as we have intangible assets worth N$ 141.9 M which
would comprise of brands and patents, and if there were to be a
patent infringement there might be a problem
• The departments of Finance, buying and IT are handled by the
Finance Director. It would be better if the buying department were
to be headed by a separate sourcing director because if the finance
director were to overlook both finance and buying, independence
might be compromised. We also have a chief buyer who manages
the buying department, it would be ideal if this department together
with the chief buyer to act on their own and not under the Finance
Director
Copyright © 2017 Nanaska.com, All Rights Reserved
46
Distribution of Joocy Juice
61
Copyright © 2017 Nanaska.com, All Rights Reserved
Franchise to bottle and sell a global brand of cola
drink
• It began in 1899 when two Tennessee lawyers, Benjamin F. Thomas
and Joseph B. Whitehead, approached Coke's chairman Asa Griggs
Candler and asked if he would let them bottle Coke. The drink was
sold as a syrup that retailers would mix with soda water, but it wasn't
typical to drink cola on the go or bring it into the home.
• Candler decided to hand over the bottling rights for just a dollar,
which he never collected, because he was content with maintaining
the rights to the syrup. This marked the beginning of what the
company internally calls The Coca-Cola System, a franchise
partnership with bottlers that allowed the brand to truly take off.
70
Copyright © 2017 Nanaska.com, All Rights Reserved
Ratio comparison
Ratio
Fizz
Qwench
GP Margin
51%
59%
Based on the GP margins it can be said that
Qwench is selling it’s inventory at a higher
profitability than that of Fizz
NP Margin
20%
16%
The NP margin of Qwench is lower than that of
Fizz, this goes to show that Fizz’s ability to
translate most of its revenue into profit as
opposed to Qwench
OP Margin
23%
20%
A higher operating margin is more favourable
compared with a lower ratio because this shows
that the company is making enough money
from its on going operations to pay for its
variable costs as well as its fixed costs.
ROCE
25%
24%
The return on capital employed ratio shows how
much profit each dollar of employed capital
generates. Obviously, a higher ratio would be
more favourable because it means that more
dollars of profits are generated by each dollar of 77
capital employed. Both companies generate an
almost on par ROCE
Copyright © 2017 Nanaska.com, All Rights Reserved
97
Copyright © 2017 Nanaska.com, All Rights Reserved
Sugar substitute
A sugar substitute is a food additive that provides a sweet taste like
that of sugar while containing significantly less food energy. Some
sugar substitutes are produced by nature, and others produced
synthetically. Those that are not produced by nature are, in general,
called ‘artificial sweeteners’.
Most popular sugar substitutes would be as follows
• Stevia
• Sucralose
• Neotame
• Saccharin
• Advantame
• Aspatame
• Acesulfame potassium
Copyright © 2017 Nanaska.com, All Rights Reserved
101