Case Type: reduce costs.
Consulting Firm: PA Consulting Group 2nd round job interview.
Industry Coverage: Food & Beverages.
Case Interview Questions #00034: Your client Planters is a large salted snack food company and a division of Northfield, Illinois-based food and beverage conglomerate Kraft Foods (NYSE: KFT). Planters is best known for its processed nuts products such as Planters Dry Roasted Peanuts, Honey Roasted Peanuts, etc.
You have been hired the CEO of Planters because your client has steadily been losing market share over that past two years, from a high of 20% to the current level of 18%. Profits as a percent of sales, however, have been growing. You were asked to find out what could be causing this? Should Planters be concerned about this?
Additional Information: (to be given to you if asked)
Market Size: The size of the total salted snack food market has grown from $15 billion to $17 billion during these two years. From this, the job candidate should do a quick mental math:
- Sales two years ago: $15 billion * 20% = $3 billion
- Sales in current year: $17 billion * 18% = $3.06 billion
The conclusion should be that the client’s total dollar sales have actually grown over that past two years, but not kept pace with the market.
Costs: The costs for your client have changed over this period: (% of selling price)
| Current | Two years ago | |
| Raw Ingredients: | 28% | 26% |
| Conversion costs: | 24% | 24% |
| Distribution: | 8% | 9% |
| Marketing: | 16% | 18% |
| Sales force: | 7% | 9% |
| Pre-tax profit: | 17% | 14% |
The total sales force was cut to reduce costs, though the same number of outlets are still covered by this sales force. The changes in the marketing budget come from reduced trade promotions.
Products/Distributions: The product line of the client has not changed over this period. The products are mostly sold through large grocery store chains and convenience stores. The sales force generally visits each customer at least once per quarter. Promotions usually occur at the end of each quarter. Grocery stores and convenience stores require some type of promotion to grant valuable end of aisle displays or advertising space.
Competition: The largest competitors are two multinational consumer products companies that feature complete lines of snack foods. Their sales forces are regarded as the best in the industry. Together, these two companies have 55% of the market.
Possible Solution:
The data show that the greatest change over the last two years is in the sales force numbers. It turns out that
