Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
  1. Dashboard 1
  2. Case Library 2
  3. Interviewer-led (McKinsey style) 3
  4. Intermediate 4
  5. Grocery Wholesaler 5
Case

Grocery Wholesaler

Solved 9.4k times
Grocery Wholesaler Our client Fresh Groceries is a prominent wholesale food company that is trying to increase their profitability. The client currently sells a variety of food items and is collecting a significant amount of business and generating sufficient profit. However, the company is trying to gain more profitability from its existing lines of business.
3.8 5 637
Difficulty: Intermediate | Style: Interviewer-led (McKinsey style) | Topics: Profitability analysis, Pricing, Market analysis

Problem Definition

Our client Fresh Groceries is a prominent wholesale food company that is trying to increase their profitability.

The client currently sells a variety of food items and is collecting a significant amount of business and generating sufficient profit. However, the company is trying to gain more profitability from its existing lines of business.

Comments

This is an interviewer-led case; therefore the interviewer should lead the candidate through the case.

Short Solution (Expand)

Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the "Case exhibits" section

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

I. Background

At this point the interviewee should understand the company's problem and thus the interviewer should share some basic background information.

Market Economics:
  • The market that the client is operating in is growing at the same rate as GDP, and high barriers to entry are present.

Client Characteristics:

  • The client is the market leader, offering a range of high and low-end food products. Its main consumers consist of hotels and restaurants.

Competition:

  • In each region, the client faces some competition, with most areas having a duopoly or fragmented industry.

II. Analysis

Current business situation

Diagram 1 should be shared with the interviewee once the case has been introduced.

1. What assessments/assumptions can you make from the diagram?

From Diagram 1, the interviewee should make assessments about the following topics:

  • Competitive dynamics
  • Market position
  • Causes of any changes from 2012-2015

2. What are three main points are important to mention?

Once the qualitative assessments have been made, the interviewee should identify these main points:

  • The business likely has significant economies of scale and distribution, explaining their increases in market share in North America.
  • For the same reason, it also makes sense that market share in Asia and Europe fell between 2012 and 2015.
  • The decrease in the overall market share in Asia corresponds with the fact that Asia is mostly emerging economies with high growth rates.

Key insights:

  • Price competition should be less severe in North America than in Asia, due to already high market share.
  • Due to the company’s position as a market leader in North America, it could become a price leader.

Bonus points for excellent case response
  • An interviewee with excellent performance would identify what the drivers are for changing the market dynamics for each continent and recommend a potential strategy (i.e. Price leadership in North America).
  • Additionally, an interviewee with excellent performance will immediately identify the relationship between gross margin/elasticity and recommend strategies from the situation in Diagram 3.


Gross Margins:

Diagram 2 should be shared with the interviewee once the issues in Diagram 1 have been solved.

3. Please indicate what should be on the x-axis.

The interviewee should identify that the missing label on the x-axis is price elasticity.

4. Please illustrate the relationship between gross margin and what was concluded the x-margin was. (Refer to previous question).

They should then be asked to illustrate what the relationship between gross margin and price elasticity is, and draw a downward-sloping line from the top left corner.

Key Insights:

  • It is expected that there is a negative linear relationship between gross margin and price elasticity.

Elasticity

Diagram 3 should be shared with the interviewee once the issues in Diagram 2 have been solved.

5. What observations can you make from the diagram?

From Diagram 3, the interviewee should make the following observations:

  • In reality, demand elasticity and gross margin do not have the negative linear relationship that was predicted in Diagram 2.
  • Quadrants I and III are behaving in line with expectations, so nothing needs to be done.
  • In Quadrant II, demand is very elastic, but high profit margins also exist – therefore, cutting prices and thus increasing profits is an option.
  • In Quadrant IV, both elasticity and margins are low, suggesting that prices can be raised to gain additional contribution margin.

Key Insights:

  • There are three main strategies that the client can follow to further increase profitability in each region.
  • While Quadrants I and III are working well, changes need to be undertaken in quadrants II and IV.

III. Recommendation

6. What conclusions have you made for Fresh Groceries Wholesale?

The interviewee should come to the following conclusions:

  • Decrease prices in Quadrant II
  • Increase prices in Quadrant IV
  • Continue the current pricing strategies in Quadrants I and III

Difficult Questions

More questions to be added by you, interviewer!

Download case
Related BootCamp article(s)

Economies of Scale and Scope

Use the concept of economies of scale and economies of scope to uncover potential areas for growth and profitability improvement in your consulting Case Interview

Income Statement

The income statement, also known as profit and loss statement, is a summary of the revenue and costs over the last year. Costs are subtracted from revenue and as a result, either positive or negative net income is generated. The income statement belongs to the three financial statements together with the balance sheet and cash flow statement.

The Value Chain

The Value Chain - as e.g. by Porter - is a classic framework to structure the activities of a business and add value to products by transforming resources.

Supply and Demand

The concept of supply and demand, along with the relation to price, is one of the most basic concepts in economy. It states that prices will shift until an equilibrium price is reached, where supply and demand of a good match perfectly.

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

1 Q&A Quiz
3.8 (637 ratings)
3.8 5 637
Case exhibits

1. What assessments/assumptions can you make from the diagram?

2. What three main points are important to mention?

3. Please indicate what should be on the x-axis.

4. Please illustrate the relationship between gross margin and what was concluded the x-margin. (Refer to previous question).

5. What observations can you make from the diagram?

6. What conclusions have you made for Fresh Groceries Wholesale?