Transcript Diapositive 1 - Royal Institute of Technology

ME2027 - Performance & Cost Analysis
Seminar presentation
Rémy Cointreau
Pablo Breitenmoser
Renaud Gentil
Claire Joumard
Rija Razafimahatratra
25th November 2007
1/10
The Company And Its Value Chain
Presentation :
The value-chain analysis:
R&D
Content
Design
Packaging
Production
Supply:
Bottles, caps,
stickers
Core Process:
Cultivate,Vat,
Jam
Marketing
B2C, luxe
Distribution
R. C. Dist.
Network
Customer
Service
After Sale
services
Maxxium
2/10
Cost Allocating and Cost Tracing
Direct Costs
Cost
Tracing
Traditional
costing system
Indirect costs
Cost Objects
(Champagne bottle)
Cost Allocation
ABC
Because Production activities are direct
 1 sort of Champagne produced in one place (Reims in
Champagne-Ardennes)
3/10
Activity-Based-Costing (ABC)
1)
3)
2)
• Choice of the activities
• Costs of the different activity cost centres
• Choice of relevant cost drivers -> calcul of the cost driver rate
Total costs per unit output
• Apply the cost driver rates to the Champagne
4/10
Calcul Of The Break-Event Point
 Variable costs
 Raw materials (bottles,
stickers, grappes, etc.)
 Fixed costs
 Use of plants
 Use of machines
 Selling price: 12,7/bottle
 Variable cost per bottle: 11,5€
 Fixed cost: 1 300 000€
 Break even point:
(12,7-11,5)*x=1 300 000
x=1 083 333
5/10
Break-Even Point
Costs and
revenus
150 000 000
Turnover
120 000 000
Profit: 10 000 000
90 000 000
Total costs
60 000 000
30 000 000
Fixed costs
1 083 333
2
4
6
8
10
Number of
bottles (in
million)
6/10
Relevant Costs and Investment
Decisions
Costs
Decision: The projects for the
champagne division on the Allée du
Vignoble site are :
- Construction of new administrative
offices
- Expansion of the fermenting room
- Construction of a bottle turning room.
These follow the disposals in progress
of the sites at Boulevard Henry Vasnier
and a part of Chemin Vert.
The total cost estimated is
€7 million
Relevant
Raw materials
No relevant
X
Property taxes
X
Insurance of machinery
X
Depreciation of machinery
X
Insurance of buildings
X
Indirect materials
X
Power supply for the firm
X
Personnel
X
7/10
7 000 000 €
Investment
Revenue for one bottle
12,70 €
Cost of sales for one bottle before the project
11,60 €
Number of bottle in more by year
1 200 000
Cost of sales for one bottle after the project (depreciation in more,
insurance…)
11,80 €
0,90 €
Profit for one bottle
1 080 000,00 €
Profit by year
Time to have the return of investment in excess of the investment (years)
Millions
Profit
8 years
7 years
6 years
5 years
4 years
3 years
2 years
1 year
9
8.64
8
7.56
7
6.48
6
5.4
5
4.32
4
3.24
3
2.16
2
1 1.08
0
6,481481481
8/10
Cost variance analysis & Decision
making
Cost variance analysis
Using cost variance analysis to budget the future and compare forecast with actual outcome.
 Rémy Cointreau works within a established old markets  fight for market share  difficult to predict
 Rémy Cointreau’s luxury alcohol product portfolio is mainly defined by its brand’s  reputation of the brand
Explenation of cost variances:
• international markets  variation in exchange rate, taxation and costumer acceptance
• Sales volume (costumer preferences)  marketing costs
• Marketing in order to promote brand  reputation
Decision making
starting point new market? 1. Decision Probability
Should Rémy Cointreau set
up a own distribution network
and quit partnership?
2. Decision Probability outcome
(success)
new market
success (0.8) Invest
choice
overall probability
0,6
very successful Invest
0,48
0,3
moderately
Invest
0,24
0,1
failure
Don't invest
0,08
Don't invest
0,2
yes
Invest
 Yes, possibility to grow
oganically by reducing costs
and increaing value chain.
Distribution
new market
failure (0.2)
Don't Invest
Don't invest
Don't invest
no
9/10
Risk Policy
Legal Risks
Regulations differ for every country (Production, packaging, marketing).
 Integrated legal department carries out preventive checks on all legal risks. (cost about 5% product revenue)
 no contracts with third parties that carry major obiligations for the entire group  cost very predictable
Costumer
No operations in unstable regions.
 Almost zero exposure to costumer risks  low costs
 limitation through one strong network (network as costumer)  Maxxium (Europe), Carrebean (USA)
Competitior
Highly competitive market environment
 Permanent focus on its brand, quality of its product, price and optimizaition of distribution
Industrial & Environmental Risks
Rémy Cointreau’s operations are based on permanent industrial and food safety requirements.
ISO 14001 / HCAAP, Hazard Analysis of Critical Control Point (ISO 22000, roll-out 2007),
QSE - Quality, Safety Environment
 high brand reputation  consumer awareness  “zero defect“ policy
10/10