Hanson Private Label: Evaluating an Investment in Expansion
1. How would you describe HPL and its position within the private label personal care industry?
Hansson Private Label (HPL) is a manufacturer of products such as soap, shampoo, mouthwash, shaving cream, sunscreen and other personal care products. Its mission is to be a leading provider of high-quality private label personal care products to America’s leading retailers. The main topic of this paper is to evaluate a new investment of 50 million for a private label manufacturing proposal by a key partner. This will increase debt but bring new customers and new opportunities. However it also brings risks to lose some existing customers on the long run. The project mainly spans in 3 years. So Hansson is evaluating the return on investment of this proposal on a market that is slow growing. Now lets look at some other background regarding HPL the industry and HPL’s current position.
All private label products are sold under the name of the retail partners. These partners include mass merchants, grocery, club, drug and dollar stores. They are some of the major national and regional retailers in United States: some of which have international presence.
The company was bought for $42 million by Tucker Hansson which invested $25 million of its own money. Tucker had carefully built and managed the firm for the past 15 years. In 2007 HPL had four plants that operated at 90 percent capacity and revenue of $681 million.
HPL products are part of a $21.6 billion personal care products market in the United States. The market grew approximately 1 percent per year by volume and 1.7 percent by sales due to modest price increases. Private label products in personal care account for approximately 19 percent, $4 billion in retail sales which equal with $2.4 billion in wholesale sales from the manufactures. HPL has a 28 percent share of that market.
2. Using assumptions made by Executive VP of Manufacturing, Robert Gates, estimate the projects’ FCFs (free cash flows).
Hansson Private Label (HPL) is a manufacturer of products such as soap, shampoo, mouthwash, shaving cream, sunscreen and other personal care products. Its mission is to be a leading provider of high-quality private label personal care products to America’s leading retailers. The main topic of this paper is to evaluate a new investment of 50 million for a private label manufacturing proposal by a key partner. This will increase debt but bring new customers and new opportunities. However it also brings risks to lose some existing customers on the long run. The project mainly spans in 3 years. So Hansson is evaluating the return on investment of this proposal on a market that is slow growing. Now lets look at some other background regarding HPL the industry and HPL’s current position.
All private label products are sold under the name of the retail partners. These partners include mass merchants, grocery, club, drug and dollar stores. They are some of the major national and regional retailers in United States: some of which have international presence.
The company was bought for $42 million by Tucker Hansson which invested $25 million of its own money. Tucker had carefully built and managed the firm for the past 15 years. In 2007 HPL had four plants that operated at 90 percent capacity and revenue of $681 million.
HPL products are part of a $21.6 billion personal care products market in the United States. The market grew approximately 1 percent per year by volume and 1.7 percent by sales due to modest price increases. Private label products in personal care account for approximately 19 percent, $4 billion in retail sales which equal with $2.4 billion in wholesale sales from the manufactures. HPL has a 28 percent share of that market.
2. Using assumptions made by Executive VP of Manufacturing, Robert Gates, estimate the projects’ FCFs (free cash flows).