Expert case by

MBB first round - Soy Technologies

Difficulty: Advanced

Candidate-led

< 100 Ratings

Times solved: 14.5k

Growth strategy Market entry Market sizing Mergers & Acquisition New product Profitability analysis Restructuring Sustainability

Case Prompt:

Our client, Soy Technologies specializes in soy production and processing.

The client harvests their soybean crops and processes the soybeans to extract the protein and create soybean meals that are later used for animal feed.

Since the demand for soy protein has been steadily increasing in recent years, our client has been looking at more profitable alternatives to create different soybean products, but our client is unsure about the next steps since they would have to entirely change the current processing operations.

The alternatives that our client is currently considering are:

Producing soy milk which requires 45% of the extracted protein.
Producing soy concentrate which requires 70% of the extracted protein.
Producing soy isolate which requires 90% of the extracted protein.

Our team has been asked to assist them in deciding which option would be best.

Overview of All Exhibits

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Practicing alone helps – with a partner it’s even better. Solve this case in a realistic mock interview.

Question 1:

SoyTechnologies has been approached by a company specialized in sports nutrition. Their proposal is to create a joint venture focused on soy protein products.

The CEO of SoyTechnologies believes that the joint venture is a great idea. However, she is concerned that she does not know anything about sports nutrition.

What do you expect to be the most relevant factors for consumers of sports nutrition products that are plant-based?

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Note for Interviewer

The interviewer should look for the following features in the candidate's answer:

The answer is deep, broad and insightful. It covers all areas of the problem, they are explained well and in detail, and they show a good understanding of the client situation
The candidate takes time to think about the problem, then gets back with a structured approach. Ideally, the candidate presents the structure top-down using the pyramid principle, counting first through the buckets and then going into detail into each of them
The candidate speaks at a pace that is easy to understand, is keeping the interviewer engaged, and is approaching the interview as a conversation (instead of a presentation).

Last but not least, this particular case lies at the boundary between interviewer-led and candidate-led cases and it requires more guidance from the interviewer.

External considerations (sustainability-oriented)

Environmental. Is the product carbon neutral and pesticide free? What are the environmental commitments of the firm?
Social. What are the CSR commitments of the organization? Does the organization pay fair prices to their internal and external stakeholders?
Governance considerations. What is the diversity like within the organization? Does their marketing reflect this?

Personal considerations

Product characteristics. Does the product taste good? Can it be used as a substitute for animal products with minimal changes in performance and taste? Does the product have the right consistency?
Health considerations. What is the protein content of the product? How easily is it absorbed? Is it reinforced with vitamins? Is it NON-GMO / additive-free. Sugar content?
Marketing and distribution. Is the product priced reasonably for the value I am receiving? Is the product available as a substitute in my favourite supermarkets and cafes? Is the packaging attractive enough / practical enough?

Question 2:

The CEO of SoyTechnologies believes that the joint venture is a great idea and is enthusiastic about this opportunity. However, there are many different types of products out there.

The team has looked at the results of a recent research done in South America and came across the following data (Exhibit 1).

What product should the new Joint Venture focus on?

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Question 3:

The CEO of SoyTechnologies is intrigued by the product options and would like to know more about how our profitability would look like if we were to manufacture soy protein bars. We have gathered more data on our current production and the potential demand of the product.

Based on the given data, what profit can the CEO expect from this product?

Additional information:

Soybeans harvested per acre: 2,000kg

Number of acres: 80 acres

Protein Yield: 80%

Weight per pack: 0.5kg

Raw material costs: $20 per box

Harvest costs: $3.12M

Expected sales price: $40 per box

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Note for Interviewer

The candidate should clarify the question with the interviewer and play back the critical data points to ensure they understood it correctly. The candidate should then take time to structure their answer and come back to the interviewer with a step-by-step approach (For a free guide on how to best approach calculation questions, reach out to Coach Cristian).

If the candidate struggles, the interviewer should nudge them along the way to reach the correct approach.

It is imperative that the candidate interprets the correct result at the end and explains it within the context of the case.

Step 1: Calculate the number of boxes that we can sell

Harvest per acre x number of acres x yield / quantity per box = 2000kg x 80 acres x 80% / 0.5kg per box = 128,000 kg / 0.5 kg per box = 256,000 boxes

Step 2: Calculate the total revenues

Sales price x number of boxes sold = $40 x 256,000 boxes = 10.24M

Step 3: Calculate costs

Costs per pack x numbers of packs + harvest costs = $20 x 256k boxes + $3.12M harvest = $5.12M + $3.12M = $8.24M

Step 4: Calculate profitability

Revenues – Costs = $10.24M – $8.24M = $2M

It appears we can anticipate a $2M profit from the production of Soy Protein Bars. This could be a dangerous endeavour, given that the result implies a 20% profit margin and is based on the premise that we sell all of the boxes we create. Considering the significant fixed costs involved with soy bean harvesting, the client should contemplate switching to items with greater margins or to those that maximise crop yield.

Question 4:

The CEO of SoyTechnologies has decided to move forward with the Joint Venture.

Therefore, she asked our team to calculate how many years it will take for the new established company to break-even?

Data:

Yearly revenue: $10M

Yearly costs: 80%

Building of production facility: $1M

Equipment & machinery costs: $6M

Other costs: $5M

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Note for Interviewer

If the candidate struggles, the interviewer should nudge them along the way to reach the correct approach.

It is imperative that the candidate interprets the correct result at the end and explains it within the context of the case.

Step 1: Calculate yearly profitability.

Yearly revenues – yearly costs = $10M – 80% = $2M

Step 2: Calculate fixed costs.

Building of production facility + equipment and machinery + other costs = $1M + $6M + $5M = $12M

Step 3: Calculate break-even time.

Fixed costs / yearly profitability = $12M / $2M = 6 years

It appears that it would take us six years to recoup our investment, which is a considerable amount of time. There may be a decline in demand, a shift in consumer preferences, or even the development of more efficient machinery within the next six years. Consequently, I would like a more detailed breakdown of the equipment and other costs in order to discover possibilities for cost reduction and maybe reach break-even more quickly.