Sticky Surfactants
Practice this intermediate profitability case interview question in the Manufacturing sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.
ProHub Comment
This case teaches candidates to identify that identical cost structures between competitors can mask profitability gaps driven by pricing power. The framework guides candidates through three strategic options (increase profitability via pricing, repurpose the asset, or divest), with the key insight being that matching competitor pricing could generate $42M in annual incremental profit through contract price renegotiation.
Estimated Time
26 minutes
Difficulty
Medium
Source
Darden
10
/ 100
Your client, CavalierChem, is a global chemicals manufacturer. CavalierChem recently acquired a manufacturing facility that makes surfactants as part of a larger purchase of competitor assets. Surfactants are a specialty chemical used for a variety of purposes, including laundry detergent, and the client has very little prior experience with this type of product. The manufacturing facility is not currently generating profits, and the client wants your help in determining what to do.
Clarifying Information
- Does CavalierChem have a target in mind? The client wants to make the highest return from this facility as possible in the next 5 years
- What is CavalierChem’s core business/how do they make money? 80% of CavalierChem’s revenues come from the sale of commodity plastics to other manufacturers. The other 20% comes from a wide mix of products that are either downstream or byproducts of their core business.
- Why did they make this acquisition? The manufacturing facility in question was part of a bundled acquisition of other manufacturing assets that are of strategic importance to CavalierChem. CavalierChem now wants to evaluate the surfactant factory on its own.
- What does the surfactant market look like? The market for this particular surfactant is $300M annually. CavalierChem and one other competitor are the only significant manufacturers.