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Hola-Kola

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by

Claire Flickinger

on 24 March 2014

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Transcript of Hola-Kola

Hola-Kola

Presented by:

Bebida Sol
Company history
Founded in 1998 by Roberto Ortega
Created a private labeled carbonated soft drink company based in Mexico
Customer Profile
Customer base is targeted towards middle to low income individuals
Products are sold in small, independent grocery and convenient stores in Mexico
The Industry
Mexico has highest consumption of carbonated soft drinks per capita in the world
Market Leaders
Coca-Cola
Pepsi-Cola
Dr. Pepper Snapple
Grupo Penafiel
Combined market share of more than 90%
Market Consumption volumes increased 4.5% between 2007-2011
Hope Edlebeck, Nicole Wehse,
Mariah Mleziva, and Claire Flickinger

Business Opportunity
The Proposal
Hola-Kola
low-price, zero-calorie carbonated soft drink
Project Financing
Five-year, 16% annual interest term loan
18.2% weighted average cost of capital for this project
Capital Budget - 0% Inflation
Cash Budget - 5% Inflation
Sensitivity Analysis
Effect on NPV as raw materials and selling price increase
Effect on NPV as sales volume and selling price fluctuate
Effect on NPV as labor costs and selling price fluctuate
Erosion of Sales
Recommendations
For the base case, we recommend to
reject
the project

For 5% inflation, we recommend to
accept
the project

Based on the sensitivity analysis, we recommend that Ortega should
increase selling price
by .50 pesos.

Ortega should market the new product towards
low-income individuals
who do not have any low-cost substitute products

Ortega should consider pursuing his fathers plan to
venture into the mineral water
business
Questions?
Risks of undertaking project
Erosion of current products
No demand for diet soda
Government increases regulation on soda
Competitors lower their price
Decrease of 800,000 pesos of after-tax cash flows (NI)

Net Income for 2011 was 50.145 million Pesos

Decrease is not very significant
Benefits
Increase market share
Increase in net income
Improvement of efficiency
More production space
NPV:
$(1,716,060.82)
IRR:
16.86%
MIRR:
17.44%
Payback Period:
3.41 years
Discounted Payback Period:
Never
Profitability Index
: 0.97






NPV:
$1,809,869
IRR:
19.55%
MIRR:
18.98%
Payback Period:
3.29 years
Discounted Payback Period:
3.16
Profitability Index
: 1.03
Full transcript