Euroland Foods S.A.
Case Study of Euroland Foods S.A.
The case of Euroland Foods S.A. is about a multinational company that produces high-quality ice cream, yogurt, bottled water, and fruit juices. Euroland Foods was founded in 1924 by Theo Verdin. The performance of the company was steady over the years, but since 1998 to 2000 the company had no growth. The management team thought that was because of the low population growth in northern Europe and market saturation in some areas. The management team hoped that increase in market share and sales would help company growth.
Eurplamd food has a senior management committee meeting at every beginning of the year. The meeting will help company’s board director to decide the new capital budget in this year. In the latest meeting in January 2001, the senior management committee gave company’s board of directors 11 major projects, total counted about EUR316 million, but in this year the spending limit on capital project was only EUR120 million, so it was necessary to choose the right projects that will help company growth and maximize the shareholders’ wealth.
In these 11 projects, four projects are about product or market extension, three projects are about new product or new markets, three projects are about efficiency improvements, and one project is about safety or environmental. The company has a minimum acceptable IRR and maximum acceptable payback years in each category. You can find the information on Exhibit 1.
Ranking all these projects was the first thing need to be done. Based on the NPV at Corp.WACC(10.6%) and IRR gave the best understandable answer to the company’s board of directors. You can find this ranking of criteria on Exhibit 2.
The first one in the ranking list is the project of Strategic Acquisition. The project has a high return EUR198.5 million, but the expenditure was high too about EUR55 million. The second one on the ranking list will be the Southward Expansion, the expenditure of this project is
The case of Euroland Foods S.A. is about a multinational company that produces high-quality ice cream, yogurt, bottled water, and fruit juices. Euroland Foods was founded in 1924 by Theo Verdin. The performance of the company was steady over the years, but since 1998 to 2000 the company had no growth. The management team thought that was because of the low population growth in northern Europe and market saturation in some areas. The management team hoped that increase in market share and sales would help company growth.
Eurplamd food has a senior management committee meeting at every beginning of the year. The meeting will help company’s board director to decide the new capital budget in this year. In the latest meeting in January 2001, the senior management committee gave company’s board of directors 11 major projects, total counted about EUR316 million, but in this year the spending limit on capital project was only EUR120 million, so it was necessary to choose the right projects that will help company growth and maximize the shareholders’ wealth.
In these 11 projects, four projects are about product or market extension, three projects are about new product or new markets, three projects are about efficiency improvements, and one project is about safety or environmental. The company has a minimum acceptable IRR and maximum acceptable payback years in each category. You can find the information on Exhibit 1.
Ranking all these projects was the first thing need to be done. Based on the NPV at Corp.WACC(10.6%) and IRR gave the best understandable answer to the company’s board of directors. You can find this ranking of criteria on Exhibit 2.
The first one in the ranking list is the project of Strategic Acquisition. The project has a high return EUR198.5 million, but the expenditure was high too about EUR55 million. The second one on the ranking list will be the Southward Expansion, the expenditure of this project is