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Medium Growth Strategy M&A Competitive Analysis

Little Bud Co.

#CPG #Consumer Packaged Goods #Beverages #Beer
ProHub Comment

This case effectively teaches M&A valuation and competitive dynamics in mature markets. The key insight is recognizing that scale economies create an insurmountable competitive moat, making a sale to the competitor (or to a strategic bidder in an auction process) the optimal value-creation strategy. Candidates must move beyond operational improvements to strategic alternatives.

Estimated Time 15 minutes
Difficulty Medium
Source ROSS
50 / 100

Our client, Little Bud Co, is a beer company in a small country in Latin America. Little Bud and its main competitor, Geineken, are the only players in the market. Geineken’s operations are significantly bigger than Little Bud’s.

Little Bud’s CEO asked us to provide her with strategic options for the company and a recommendation on what she should do.

Clarifying Information

  1. If interviewee asks, “What are the CEO’s Goals?”, turn the question back: “What are the goals of a company?” Then rapidly lead conversation to the goal of maximizing shareholder’s value
  2. Market is mature (growth is low)
  3. 10% of sales are made through large retailers and 90% through bars, restaurants and small retailers
  4. Focus on market of regular beer; market for small brewers / specialty beers should be disregarded (very small market)