Packaging Co. is a private equity owned global packaging company looking to maximize revenue and earnings growth before an exit from the business in the next 5 years. Packaging Co. has 5 business units out of which, its 2 North American business units (Plastic packaging and Paper packaging) were recently consolidated under a new leadership.
Sales in the Paper packaging business unit have declined over the last few years as several key customers have transitioned their packaging to plastic. Last year, paper profit margins decreased sharply, despite the introduction of several new production asset. The paper market is consolidating, creating larger competitors (several of which are vertically integrated with paper mills giving them a theoretical cost advantage)
The company was facing the following challenges:
- External market pressures:
- Pricing pressure causing margin erosion and the loss of several major customers
- Rising raw material costs compressing margins
- Industry consolidation resulting in strong competitors
- Rapidly changing customer preferences
- Internal growth challenges:
- Inconsistent pricing process & system
- Aged assets creating high manufacturing cost
- Customer targeting and prioritization process in early stages of development
The CEO of Packaging Co. engaged Bain to help the Plastic and Paper business units prepare for a sales growth.
Bain plans to help Packaging Co. increase its sales. Which of the following options will help in designing the MOST SUITABLE solution to address Packaging Co.'s challenges?
- Increase production capacity to generate high volumes
- Cost effective way to acquire new customers through new tendering process
- Optimising product pricing to boost margins
- Restructuring the budgeting mechanism to avoid unnecessary spending
- Optimizing the distribution network
- Procurement rationalization
- Modifying the product combinations