Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty; Lauren G. Pickle

Case | HBS Case Collection | December 2017 (Revised March 2018)

Bega Cheese: Bidding to Bring Vegemite Back Home

by Benjamin C. Esty and Lauren G. Pickle

Abstract

In January 2017, the leadership team of Bega Cheese—the Australian dairy company—was considering a bid for Mondelēz International’s Australia and New Zealand (ANZ) grocery business, which included several leading consumer brands such as Vegemite, the iconic Australian spread. The team must decide whether to bid for the division and, if so, how much to offer and how to finance the all-cash bid. Making these decisions was difficult because this would be Bega’s largest acquisition ever and it would extend the firm outside of its core dairy business. In addition to the valuation and financing issues, the leadership team must decide whether shifting from the firm's current B2B business model (manufacturing and processing dairy products) to a more B2C business model (a producer of branded consumer foods) made sense strategically.

Keywords: Mergers ＆ Acquisitions; valuation; value drivers; value creation; discounted cash flow (DCF); dairy industry; corporate scope; diversification; consumer goods; iconic brands; Australia; corporate finance; capital structure; bidding strategy; cross border; financing; Mergers and Acquisitions; Valuation; Value Creation; Business Divisions; Capital Structure; Food; Bids and Bidding; Consumer Products Industry; Food and Beverage Industry; Australia; United States;

Language: English

Format: Print

17 pages

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Citation:

Esty, Benjamin C., and Lauren G. Pickle. "Bega Cheese: Bidding to Bring Vegemite Back Home." Harvard Business School Case 218-001, December 2017. (Revised March 2018.)

Related Work

Supplement | HBS Case Collection | December 2017

Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty and Lauren G. Pickle

In January 2017, the leadership team of Bega Cheese—the Australian dairy company—was considering a bid for Mondelēz International’s Australia and New Zealand (ANZ) grocery business which included several leading consumer brands (Vegemite—the iconic Australian spread, ZoOsh, and Bonox as well as licenses to produce various Kraft products). The team must decide whether to bid for the division and, if so, how much to offer and how to finance the acquisition. Making these decisions was difficult because this would be Bega’s largest acquisition ever (the target’s sales were 25% of Bega’s total sales) and it was outside of Bega’s core dairy business. The leadership team has to decide whether a shift from the current B2B business model (manufacturing and processing dairy products) to more of a B2C business model (a producer of branded consumer goods) made sense strategically.

Keywords: Mergers ＆ Acquisitions; valuation; value drivers; value creation; discounted cash flow (DCF); dairy industry; corporate scope; diversification; consumer goods; iconic brands; Australia; corporate finance; capital structure; bidding strategy; cross border; Mergers and Acquisitions; Valuation; Value Creation; Business Divisions; Capital Structure; Food; Bids and Bidding; Retail Industry; Consumer Products Industry; Food and Beverage Industry; Australia; United States;

Citation:
Esty, Benjamin C., and Lauren G. Pickle. "Bega Cheese: Bidding to Bring Vegemite Back Home." Harvard Business School Spreadsheet Supplement 218-701, December 2017. View Details

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Supplement | HBS Case Collection | December 2017

Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty and Lauren G. Pickle

In January 2017, the leadership team of Bega Cheese—the Australian dairy company—was considering a bid for Mondelēz International’s Australia and New Zealand (ANZ) grocery business which included several leading consumer brands including Vegemite, the iconic Australian spread. The team must decide whether to bid for the division and, if so, how much to offer and how to finance the all-cash bid. Making these decisions was difficult because this would be Bega’s largest acquisition ever and it would extend the firm outside of its core dairy business. In addition to the valuation and financing issues, the leadership team must decide whether shifting from the firm's current B2B business model (manufacturing and processing dairy products) to more of a B2C business model (a producer of branded consumer foods) made sense strategically.

Keywords: Mergers ＆ Acquisitions; valuation; value drivers; value creation; discounted cash flow (DCF); dairy industry; corporate scope; diversification; consumer goods; iconic brands; Australia; corporate finance; capital structure; bidding strategy; cross border; financing; Mergers and Acquisitions; Valuation; Value Creation; Business Divisions; Capital Structure; Food; Bids and Bidding; Consumer Products Industry; Food and Beverage Industry; Australia; United States;

Citation:
Esty, Benjamin C., and Lauren G. Pickle. "Bega Cheese: Bidding to Bring Vegemite Back Home." Harvard Business School Spreadsheet Supplement 218-713, December 2017. View Details

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Teaching Note | HBS Case Collection | December 2017 (Revised January 2018)

Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty, Lauren G. Pickle and Greg Saldutte

In January 2017, the leadership team of Bega Cheese—the Australian dairy company—was considering a bid for Mondelēz International’s Australia and New Zealand (ANZ) grocery business which included several leading consumer brands such as Vegemite, the iconic Australian spread. The team must decide whether to bid for the division and, if so, how much to offer and how to finance the all-cash bid. Making these decisions was difficult because this would be Bega’s largest acquisition ever and it would extend the firm outside of its core dairy business. In addition to the valuation and financing issues, the leadership team must decide whether shifting from the firm's current B2B business model (manufacturing and processing dairy products) to more of a B2C business model (a producer of branded consumer foods) made sense strategically. Teaching Note for HBS No. 218-001.

Keywords: Mergers ＆ Acquisitions; valuation; value drivers; value creation; discounted cash flow (DCF); dairy industry; corporate scope; diversification; consumer goods; iconic brands; Australia; corporate finance; capital structure; bidding strategy; cross border; financing; Mergers and Acquisitions; Valuation; Value Creation; Business Divisions; Capital Structure; Food; Bids and Bidding; Consumer Products Industry; Food and Beverage Industry; Australia; United States;

Citation:
Esty, Benjamin C., Lauren G. Pickle, and Greg Saldutte. "Bega Cheese: Bidding to Bring Vegemite Back Home." Harvard Business School Teaching Note 218-016, December 2017. (Revised January 2018.) View Details

Cite View Details Purchase Related
Case | HBS Case Collection | December 2017 (Revised March 2018)

Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty and Lauren G. Pickle

In January 2017, the leadership team of Bega Cheese—the Australian dairy company—was considering a bid for Mondelēz International’s Australia and New Zealand (ANZ) grocery business, which included several leading consumer brands such as Vegemite, the iconic Australian spread. The team must decide whether to bid for the division and, if so, how much to offer and how to finance the all-cash bid. Making these decisions was difficult because this would be Bega’s largest acquisition ever and it would extend the firm outside of its core dairy business. In addition to the valuation and financing issues, the leadership team must decide whether shifting from the firm's current B2B business model (manufacturing and processing dairy products) to a more B2C business model (a producer of branded consumer foods) made sense strategically.

Keywords: Mergers ＆ Acquisitions; valuation; value drivers; value creation; discounted cash flow (DCF); dairy industry; corporate scope; diversification; consumer goods; iconic brands; Australia; corporate finance; capital structure; bidding strategy; cross border; financing; Mergers and Acquisitions; Valuation; Value Creation; Business Divisions; Capital Structure; Food; Bids and Bidding; Consumer Products Industry; Food and Beverage Industry; Australia; United States;

Citation:
Esty, Benjamin C., and Lauren G. Pickle. "Bega Cheese: Bidding to Bring Vegemite Back Home." Harvard Business School Case 218-001, December 2017. (Revised March 2018.) View Details

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Case | HBS Case Collection | February 2018 (Revised March 2018)

Sandlands Vineyards

Benjamin C. Esty and Gregory Saldutte

Approximately 80% of the wineries in the U.S. break even or lose money. An even greater percentage lose money on an economic basis (i.e., after a charge for the cost of equity). Tegan Passalacqua is a successful, young, Californian winemaker who specializes in making “old vine” wine (i.e., wine from vines that are at least 60 and up to 100+ years old). By day, he is the head winemaker at Turley Wine Cellars, a leading Zinfandel producer. In his spare time, however, he runs his own winery called Sandlands, which produces premium wines using historic, out-of-favor grape varieties such as Carignane, Mataro, and Chenin Blanc. Despite the odds, Sandlands appears to be succeeding. The question is why and whether his performance is sustainable. The case is set in December 2017 as Passalacqua was deciding whether to buy a building and develop a winery at a cost of up to $500,000. Because he already owns an old vine vineyard, and has limited resources, he must decide if this is the right investment to make next.

Keywords: wine; winery; vineyard; competitive advantage; market attractiveness; Porter's 5 Forces; capital investment; industry attractiveness; Vertical Integration; entrepreneurship; performance analysis; Napa Valley; Agriculture; Entrepreneurship; Business Strategy; Competitive Strategy; Competitive Advantage; Vertical Integration; Segmentation; Food; Supply Chain; Industry Structures; Five Forces Framework; Retail Industry; Food and Beverage Industry; United States; California; Napa Valley;

Citation:

Esty, Benjamin C., and Gregory Saldutte. "Sandlands Vineyards." Harvard Business School Case 718-438, February 2018. (Revised March 2018.) View Details

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Approximately 80% of the wineries in the US breakeven or lose money. An even greater percentage lose money on an economic basis (i.e., after a charge for the cost of equity). Tegan Passalacqua is a successful, young, Californian winemaker who specializes in making “old vine” wine (i.e., wine from vines that are at least 60 and up to 100+ years old). By day, he is the head winemaker at Turley Wine Cellars, a leading Zinfandel producer. In his spare time, however, he runs his own winery called Sandlands which produces premium wines using historic, out-of-favor grape varieties such as Carignane, Mataro, and Chenin Blanc. Despite the odds, Sandlands appears to be succeeding. The question is why and whether his performance is sustainable. The case is set in December 2017, as Passalacqua was deciding whether to buy a building and develop a winery at a cost of up to $500,000. Because he already owns an old vine vineyard, and has limited resources, he must decide if this is the right investment to make next.

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Bega Cheese: Bidding to Bring Vegemite Back Home

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