The objectives of a business are to achieve growth, become profitable and to satisfy the customer’s needs. Many businesses have not optimally achieved this but Wimm-Bill-Dann has utilized their strategies in achieving a significant growth and this has been through mergers and acquisitions.
Company overview
Wimm-Bill-Dann is a Russian company that deals with dairy products, nectars, fruit juices and baby food. It is a market leader across the Russian territory with its bestsellers, J-7 juice and agusha baby food. Its market extends from Russia, former soviet republics and 10 other countries all with more than 280 million consumers. Wimm-Bill-Dann has 37 plants in Russia, Ukraine, Georgia and central Asia. The company mission is ensuring that families live a healthy life by enjoying the company’s nutritious products each day throughout their entire lifespan.
The company has several committees whose aim is to ensure that the company’s objectives are achieved. These committees include audit committee, investment and strategic planning committee and personnel and compensation committee.
The audit committees goals and objectives are to assist the board of directors in carrying their responsibility in matters concerning preparation of financial statements, ensuring that there is an effective internal control, ensuring liaising and working with internal auditors and keeping with the requirements of legislative and normative acts. The audit committee may meet once per quarter fiscal year.
The investment and strategic planning committee assists the directors in approving and carrying out its responsibility concerning mergers and acquisitions, strategic planning and investment programs. The committee meets not less than once in each quarter of a fiscal year.
The personnel and compensation committee assist in the selection of the board of directors and help in the formulation and implementing of uniform personnel policy in all of its branches, personnel appraisal, training policy, dismissal of employees, remuneration and compensation policy and corporate ethics.
The company is committed to the principles of transparency and corporate governance that is excellent. The corporate governance strength include high level of shareholder arrangement transparency, commitment to the practice of good corporate governance and the statement of the corporate governance code, being open to the investors where high level of financial and operational transparency is maintained and the presence of an effective and efficient oversight mechanism for the internal and external audit process.
Financial strategies
The company has solid financial strategies which ensure that it maintains financial stability and growth as depicted by its results.
One of the company strategies in raising finances to fund its ambitious objective of acquisitions is the placing of bonds. The recent placing of bonds by the company was on 15th march 2008 with Moscow inter-bank currency exchange and this attracted a large number of investors. This attraction of many investors shows the great trust investors have with the company.
The company financial results show that it has been on the growth phase. The results are analysed quarterly from 3 months of 2007 to 3 months of 2008.This is shown in the table below.
3 Months of 2007
6months of 2007
9 months of 2007
Financial year 2007
3 months of 2008
Gross sales
rose 40.1% year-on-year to US$542.8 million
rose 40.5% year-on-year to US$1,142.8 million
rose 40.4% year-on-year to US$1,758.3 million
38.4% growth to US$2,438.3 million
rose 34.8% year-on-year to US$731.9 million
Gross profit
increased 53.3% with gross margins increasing to 32.0% from 29.3%
increased 48.8% to US$377.8 million
increased 43.4% to US$578.4 million
increased 26.2% to US$219.5 million
increased 26.2% to US$219.5 million
Operating income
income increased 73.1% to US$51.4 million
rose 44.3% to US$108.4 million
rose 30.2% to US$168.3 million
rose 24.5% to US$214.0 million
increased 23.2% to US$63.4 million
net income
increased 84.8% to US$32.1 million
increased 40.8% to US$65.8 million
rose 30.2% to US$168.3 million
increased 29.0% to US$140.0 million
EBTDA
increased 58.8% to US$70.4 million, EBITDA margin1 increased to 13.0% from 11.4%
increased 40.3% to US$147.2 million
increased 30.9% to US$229.4 million
increased 29.0% to US$90.7 million
increased 29.0% to US$90.7 million
Earning per Share
grew to US$2.40 from US$1.50
grew to US$3.18 from US$2.17
increased 30.6% to US$41.9 million
The company profit has been growing at a high rate and this shows that there is an increase in sales of the products of the company and hence the business has managed to achieve one of the objectives of becoming profitable. We also see that earning per share is on the increase and this proves that the capital base of the company is on an increasing trend and so the investors are reaping from their investment.
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Diversification and acquisition strategy of Wimm-Bill-Dann
Diversification of products involves manufacture and the sale of different line of products. This is important in reducing risks in an organization as risks will be spread within different portfolios. In order to expand and get hold of its market, Wimm-Bill-Dann has effectively used the merger and acquisition strategy to expand its business. The company has different range of products from milk products, bottled water and different kind of juice which provide its customers with a wide choice of products to purchase.
One of the greatest acquisitions by Wimm-Bill-Dann is the acquisition of 95% stake in Depsona ZAO which is a leading Tula based juice and concentrates plant worth 34 million USA dollars. After this acquisition, Wimm-Bill-Dann placed itself strategically as a major fruit juice and concentrate producer in central Russia.
The acquisition has given Wimm-Bill-Dann a chance to access locally grown raw material hence minimizing production cost. Depsona products were under three brands which are Depsona, Fructopak and limbo. The factory is use to produce Wimm-Bill-Dann brands national brands and act as a distribution hub for them.
On September 2006, Wimm-Bill-Dann Foods announced 100% acquisition of charter capital of Surgut city Dairy plant of Russia which was the largest milk processing plant in the region. The acquisition has enabled Wimm-Bill-Damm to be a leading company and to expand its market of Ural and Siberia. This acquisition has enabled the company to reduce the expenditure on logistics since there is reduced need for transporting products within different regions. Wimm-Bill-Dann now produces under its own brand at Surgut dairy.
On September 2003, Will-Bill-Dann food announced the acquisition of an additional 47.7% of the equity capital of Ufamolagroprom hence increasing its total shareholding to 97%. Ufamolagroprom is the largest plant for the processing and production of dairy products in the republic of Bashkortostan. Originally the plant had a capacity of production of 240 tons of processed milk but now it has a capacity of 600 tons. The plant produce is sold under well-known Russian brands such as “happy milk man”, “doctor Bifi” and “wonder”. The brands distinct and attractive packaging gives it an upper hand in the market.
In October 2007, Wimm-Bill-Dann acquired Georgian foods ltd which is based in Tbilisi, Georgia. This is in the company’s strategy of growing its business by purchase of high performing companies with strong brand portfolio and having a large market size. Georgia food is one of the largest dairy producers in Georgia. This will enable the company to serve local demand of Georgia and supply the products to the adjacent market of Armenia and Azerbaijan.
In September 2003, Wimm-Bill-Dann acquired Essentuki water production and bottling facilities. The company acquired OOOHealing spring which produces Essentuki brand mineral water and OOOGeyser, owner of Essentuki water wells. The transaction was worth 4 million US dollars. This resulted in the manufacturing facility of Wimm-Bill-Dann to be 24. Through this acquisition, the company has been able to provide its customer with highest quality goods as per its strategy in ensuring that the customer needs are satisfied.
In 2006, Wimm-Bill-Dann announced the acquisition of Molka Company in Russia’s Irkutsk region, one of the largest companies that processes milk in eastern Siberia. The purchase of Molka allows Wimm-Bill-Dann to expand into the Siberian market. The company’s presence in Irkutsk allows the company to reduce the expenditure incurred during the transportation of the products.
Risk management strategy
The company has several risks which it faces whilst in operation. Currency risk is one of the risks that the company faces as most of its sales are in Rubles, while bulk cost is in hard currency.
Operational risks which occur when there is a disruption of raw material supply and increase in the price of raw milk.
Competition risk is one of the biggest risk the company faces. The Russian economy is growing in two digit figure and due to this it has attracted the attention of both domestic and international competitors. International companies have offered the greatest challenge to the company because of their strong financial strength, they have well experienced, motivated and well learned human resource pool, strong management information system which include very modern management information system which is superior than those found in Wimm-Bill-Dann and marketing capability from these company that have a worldwide presence such as Coca-Cola company. There are several international companies which compete with WIMM-Bill-Dann, the top companies being Coca-Cola Company, Nestle and Danone.
Coca cola is the largest soft drink company in the world. It owns four of the five world top brands which include Fanta, Coca-Cola, Sprite and Diet Coke. The company has worldwide recognition due to its high quality and uniformity in taste. It also has a very strong financial base and so it can easily expand to any territory in the world.
Due to this, it has provided the greatest competition to soft drink segment of Wimm-Bill-Dann as most of the people have trust in its products. The company also has many franchise and high powered advertisements which are superior to wimm-bill-dann and hence offer a great competition.
Nestle is the world largest food company in term of production and sales. It is also one of the largest bottled water makers, equipment for surgery and cosmetics. This company has a worldwide presence and its brands are highly respected around the world. The company has a strong financial background, good marketing strategies which provide it with a great opportunity to penetrate any market. This company has provided Wimm-Bill-Dann Company with big competition especially in the food manufacturing segment as it has penetrated Russian market
Danone is one of the largest dairy food and water producers in the world. It is a world largest company producing cultured dairy products. This is the largest competitor to Wimm-Bill-Dann in the production of milk products as it has penetrated the Russian market.
Human resource strategy
The company has a well formulated human resources policy which ensures that the employees are highly motivated to ensure that they are productive. The company has formulated human resources strategy that is in line with those that directly deal with expanding through acquisition. The company has a policy which ensures that labour regulations are strictly followed and that all documents relating to labour law are maintained.
The company ensures that the process of recruitment are fair and transparent in which there is no discrimination against sex ,age ,race or any prejudice against anyone. The company has a policy in which it ensures that employees are well compensated for their work and that they are offered good remuneration which will motivate them to perform well since people are an important entity in any organization.
Staffing according to human resources strategy follows demand and supply of labour. The company has made several high level appointments recently. For example in Moscow may 12 2008,the company announced the appointment of Dmitry Ivanov as the chief financial officers who has 17 years of experience in financial field.
Business strategy of Wimm-Bill-Dann
The company has excellently utilized its business strategy in ensuring that it leads in the market in terms of business .Before merging, water business was run separately with its own finance and marketing departments, workforce and distribution network. Merging enabled the company to reduce the cost involved in administration, selling and distribution expenses. This will allow the company to enjoy the economies of scale in terms of transportation and distributorship.
Also to reduce the overall cost, the dairy business was restructured so that all the transactions are directed from a central point where there is the overall management. In order to increase the output of milk, the company built a mega farm complex near St Petersberg. The farm has more than 1200 milking cows.
Information system strategy
The company has a modern information system strategy which ensures that work in the company is well organized and made easier. The company uses Oracle, a provider of enterprise software. This project covers all the key areas of the corporate activity which include marketing, finance, distribution, logistics and distribution at all of the company’s enterprises in Russia. These processes assist in quick and effective management decision and ensure that they are successfully completed. New ERP system assists in the finance department especially in accounting reporting in both Russian standards and international standards.
Marketing strategy
The company has a well-developed market strategy which has enabled it to perform well in Russia. It has different brands and through this, it provides the consumer with a wide choice. Through vigorous advertisement, it has been able to capture the attention of many customers in Russia and other part of Russia. After acquisition of different companies, it has maintained the original brand names and packaging. This is important as it will maintain the old customer for the brands of the acquired company.
Strategies that should be put to ensure that the company achieves further growth
Marketing strategy
Although the company has a solid marketing strategy but it has to put more effort in having access to the global market. It should put more effort in promotion of its products to other parts of the world that it has not accessed the market. It should explore potential market such as countries in Africa. The Company should borrow ideas from the strategies set by the Coca Cola Company. The company should also consider operating under franchise system in ensuring that its products are well distributed to the market.
The company should increase the number and variety of products and through this, the company will provide its customer with a choice of products to choose from. The company should ensure that its branding and packaging are of high standard and should change with customers change in taste and fashion. The company should consider using marketing tools such as swot analysis in ensuring that it maintains its control of Russian market and as a mean to survive in an environment that has stiff competition.
Information system strategy
Although the company has an efficient management information system such as ERP accounting software, it should consider using more than one software when performing a given task. It should look for a way in which the systems are integrated. This is to ensure that efficiency is maintained and the work done is accurate. This will also ensure that fraud activities are minimized.
Merger and acquisition strategy
The company should maintain its strategy in merging and acquiring other companies. It should consider buying stakes in competing companies to reduce the effect of stiff competition from major multinational companies. For example it would be wise if they considered buying some stakes in the Coca Cola Company.
Through this, it will borrow some ideas and skills concerning the businesses and hence improve on its performance. The company should acquire more companies in the markets in which it has not ventured. For example; it should buy companies in African countries such as those in South Africa.
Human resources strategy
It is people who make an organization to grow. To ensure that it has a rich pool of human resources, it should consider efficient training for workers to keep them updated on new skills so that the company can keep pace with other major multinational company in terms of human resources. The company should also increase the number of university fresh graduates who are undergoing management training. This is important in that it will gain new skills and different ideas from these graduates and this will assist the company in growth.
Conclusion
Will-Bill-Dann is a promising company with one of the best strategies. Its acquisition strategy has made the company to have good reputation and respect. Through its hardwork and well thought policies, the company is fast growing into one of the largest multinational companies. Through this, the company acts as a role model for other companies to emulate it.
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