Bega Cheese: Bidding to Bring Vegemite Back Home

Benjamin C. Esty; Lauren G. Pickle

Supplement | HBS Case Collection | December 2017

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 (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;

Language: English

Format: Electronic

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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.

Case | HBS Case Collection | April 2020 (Revised July 2020)

TransDigm in 2017: The Beginning of the End or the End of the Beginning?

Benjamin C. Esty and Daniel Fisher

TransDigm was a highly acquisitive company that manufactured a wide range of highly engineered aerospace parts for both military and commercial customers. Over the ten years ending in 2016, its stock price had increased ten times, and both EBITDA and revenues had grown at compound annual rates in excess of 20%. But in early 2017, investors, customers, and government officials began to question the implementation, sustainability, and ethics of the firm’s unique value creation strategy. That strategy consisted of three parts: value-based pricing, cost reductions, and new product development. In the short term, CEO Nick Howley had to decide whether to respond to the barrage of criticism; in the longer term, he had to decide whether to change the firm’s highly successful strategy.

Keywords: value capturing; Pricing strategy; supplier power; buyer power; Porter's Five Forces; bargaining power; monopoly; aerospace; acquisition strategy; value drivers; ethical behavior; regulation; growth strategy; Business ethics; defense; procurement; sustainability; Value-Based Business Strategy; Acquisition; Ethics; Private Equity; Financial Strategy; Growth Management; Performance Evaluation; Business Strategy; Competitive Strategy; Horizontal Integration; Value Creation; Competitive Advantage; Aerospace Industry; Air Transportation Industry; United States;

Citation:

Esty, Benjamin C., and Daniel Fisher. "TransDigm in 2017: The Beginning of the End or the End of the Beginning?" Harvard Business School Case 720-422, April 2020. (Revised July 2020.) View Details

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TransDigm was a highly acquisitive company that manufactured a wide range of highly engineered aerospace parts for both military and commercial customers. Over the ten years ending in 2016, its stock price had increase ten times, and both EBITDA and revenues had grown at compound annual rates in excess of 20%. But in early 2017, investors, customers, and government officials began to question the implementation, sustainability, and ethics of the firm’s unique value creation strategy. That strategy consisted of three parts: value-based pricing, cost reductions, and new product development. In the short term, CEO Nick Howley had to decide whether to respond to the barrage of criticism; in the longer term, he had to decide whether to change the firm’s highly successful strategy.

In August 2017, MoviePass dramatically lowered its subscription price from $50 per month to just $10 for up to one movie per day. The idea was to rapidly scale the business to the point where they could generate incremental revenue streams from related businesses (e.g., a share of ticket and concession revenues from theaters, advertising revenue from movie studios, and revenue from ride-sharing companies). Within two days, Moviepass had gotten 150k new subscribers; within six months, they had more than 2 million. But as of February 2018, the company faced three challenges: theaters were resisting the concept, investors were shorting the stock in record numbers, and competitors were beginning to appear. Could CEO Mitch Lowe convince investors that they did, indeed, have a viable business model and could monetize their growing subscriber base? At the same time, Lowe had to decide whether to raise subscription prices to cover the growing losses or keep prices low to attract subscribers as quickly as possible.

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Bega Cheese: Bidding to Bring Vegemite Back Home

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