Montoya Soup
Practice this intermediate profitability case interview question in the Retail sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.
ProHub Comment
This is a portfolio pricing strategy case disguised as a cost reduction problem. The core issue is that the successful Premium launch cannibalized the higher-margin Traditional and Light products, destroying overall profitability despite revenue growth. The candidate must recognize that variable cost analysis alone won't solve this—pricing strategy and managing cannibalization rates are the key drivers.
Estimated Time
27 minutes
Difficulty
Medium
Source
Kellogg
10
/ 100
In F14, Montoya Soup, a business unit of Izzy’s Healthy Foods, grew revenue and increased the contribution margins on their traditional and light soups. However, a spike in fixed costs caused them to see a dip in profitability. To offset this effect in F15, they launched a line of premium soups to increase volume and generate economies of scale. Though they felt the new launch was a success, their profitability dropped again in F15. They have hired you to diagnose the problem and propose a solution for F16.
Clarifying Information
- Client: Montoya sells cases of soup to buyers at grocery retailers who mark up the units inside to sell.
- Product: Traditional, Light, and Premium are the only product lines in Montoya Soup Co.’s product portfolio.