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Processed & Packaged Goods

Processed & Packaged Goods. Starbucks Green Mountain JM Smucker Mondelez. Know Company & Operating Environment. First step in valuation process Need to focus on main income generating activities aka “Enterprise Operating Activities” . Packaged Coffee.

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Processed & Packaged Goods

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  1. Processed & Packaged Goods Starbucks Green Mountain JM Smucker Mondelez

  2. Know Company & Operating Environment • First step in valuation process • Need to focus on main income generating activities aka “Enterprise Operating Activities”

  3. Packaged Coffee • All 4 companies have an interest in selling coffees to consumers • Some are players in the distribution of coffee, while others also have an interest in controlling the whole distribution channel.

  4. The Supply Chain

  5. Major Players in the Industry

  6. Similar Industries •Other Beverage Production & Distribution • • E.g. Tea, Soda, Juice, or Water •Baking Mix & Prepared Food Production •Grocery Wholesaling •Supermarkets & Grocery Stores •Convenience Stores

  7. Industry Definition •This industry produces coffee, typically by purchasing coffee beans and processing them into roasted or ground coffee products. The industry excludes tea production and revenue from coffee made on premises, such as in a coffeehouse or cafe. Coffee creamer production is also excluded from the industry.

  8. Primary Industry Activities Major Products and Services in Industry •Traditional ground roasted coffee •Specialized ground roasted coffee •Whole bean roasted coffee •Roasting coffee •Manufacturing coffee concentrates, including instant and freeze-dried varieties •Manufacturing coffee extracts, flavorings and syrups

  9. What really is coffee? •ARABICA The premium variety of coffee bean native to Africa, and the bean that the majority of premium coffee products are made with. •GREEN COFFEE Natural coffee beans extracted from the fruits after harvesting. •GROUND COFFEE Roasted coffee reduced to small or very small particles, depending on the end product it is being used for. •ON-PREMISE Consumption at the point-of-sale. •ORGANIC A product made from mineral and plant ingredients rather than derived chemical compounds. •PREMIUMIZATION An increasing preference toward high-end products, such as beverages.

  10. Green Mountain Coffee Roasters -Understanding Green Mountain -Founded in Vermont in 1981 -Top Corporate Citizen -Soon to be Keurig Green Mountain, Inc. -According to WSJ, Keurig machines, accessories, and K-Cups account for 92% of revenue

  11. Green Mountain Coffee Roasters Strength: Own large part of market Weakness: Not diversified income Opportunities: New types of Keurig Threats: More competitors

  12. Clearly Identify Info About Enterprise Operation Activities -Second step of Valuation Process -Financing activities do not generate value -Reformulate F/S for operating activity

  13. Green Mountain Coffee Roasters • Purchase and Roast Coffee Beans • Keurig Machines and K-Cups • Sell Coffee to Various Shops

  14. Analysis -Third step in Valuation Process -Generally draw from DuPont Model - Profit Margin & Turnovers -Forward Looking Exercise -Need to know how to allocate future assets

  15. Green Mountain Coffee Roasters

  16. Evaluate Valuation -Fourth and final step of Valuation -Use either Cash Flows or Accounting Based Valuation -Only estimate Enterprise Operating Activities, not Equity Method

  17. Questions?

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