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Medium Profitability Pricing Sales Recovery

Yogurt Company In Ecuador

#Consumer Goods #Yogurt/Dairy
ProHub Comment

This case effectively combines financial analysis with strategic pricing considerations. The key insight is that a sales decline can paradoxically increase profitability when price increases and product cannibalization are considered. Candidates must balance short-term profit optimization with long-term strategic goals around market share and product positioning.

Estimated Time 26 minutes
Difficulty Medium
Source ESADE
12 / 100
Your client is a leading yogurt producer in Ecuador. It only sells in the local market. In the last year, their sales dropped by 13.6% and they have hired us to recover their sales quickly

Clarifying Information

  1. Client has 2 SKUs, spoon yogurt and drinkable yogurt
  2. Client has no production problems
  3. Although we do not have detailed market data, we know that the yogurt market is functioning normally
  4. While the question is focused on sales growth, profitability should be considered
Mock Interview
Interviewer

Your client is a leading yogurt producer in Ecuador. It only sells in the local market. In the last year, their sales dropped by 13.6% and they have hired us to recover their sales quickly

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

An Ecuadorian yogurt producer experienced a 13.6% sales drop while maintaining two SKUs. Analysis reveals the decline resulted from price increases and cannibalization of spoon yogurt by drinkable yogurt. Despite lower sales volume, operating profits actually increased, requiring a strategic decision on whether to prioritize profit maximization or sales recovery through price optimization.

Key Insights:

  1. Price elasticity differs significantly between SKUs (spoon yogurt at $2.50 vs drinkable at $1.50), creating cannibalization opportunity
  2. Profitability increased despite sales decline ($1.45M to $1.54M operating profit), suggesting the current pricing strategy is financially sound but misaligned with stated strategic objective
  3. The case requires balancing competing objectives: profit maximization vs sales recovery, necessitating clarity on strategic priorities before making pricing recommendations
  4. Good candidates recognize that lost volume came both from cannibalization within portfolio and market share loss to competitors, requiring multi-dimensional response