For the exclusive use of V. Mai, 2017.

Harvard Business School 9-198-088

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Cafes Monte Bianco: Building a Profit Plan

“We are facing a decision that may well affect the future of our company. I expect
that each of you has adequate information to support your arguments. I don’t want to spend
our time talking about what might be without actual data.”

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The Future of Cafes Monte Bianco

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Doctoral Candidate Antonio Dávila and Professor Robert Simons prepared this case as the basis for class discussion rather
than to illustrate either effective or ineffective handling of an administrative situation.
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This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
198-088 Cafes Monte Bianco: Building a Profit Plan

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This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
Cafes Monte Bianco: Building a Profit Plan 198-088

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Assignment: Evaluate the attractiveness of the private-brand strategy.

1. Using the projected production plan for private-brand coffee (Exhibit 5), estimate key accounting variables
for the profit wheel, cash wheel, and ROE wheel.

Based on your analysis, what recommendations would you make to Giacomo Salvetti?

3
This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
198-088 Cafes Monte Bianco: Building a Profit Plan

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Income Statement for the year ending December 31, 2000

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_n`%2=E@G<";%#>E>=5%@>=<%A254%>%E';5%'B%7P,...,...

4
This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
198-088 -5-

Exhibit 2 U;52(>5"<%h">*@1%r'@G("%_2=%W2@'3*>(;`%B'*%\2BB"*"=5%:*2E";%R%T*><";%>=<%O<#"*52;2=3%UZ0"=<25G*";

Coffee Grade D C B BB A AA AAA

Price per kilogram 8,800 19,500 26,600 30,000 35,500 39,000 42,600

VOLUME (kg.)
Advertising /Sales
0% K,...,... -,P8I,... 7,KJI,... 7,I-8,... 7,7.P,... KK+,... 7-+,...
1% -,JII,... 7,K8K,... 7,IKK,... 7,7JI,... +7+,... 7I+,...
2% -,IJI,... 7,+-.,+.. 7,KJ8,... 7,--K,... +88,... --8,...
3% -,KKI,... 7,98K,... 7,+K.,... 7,PPJ,... 87.,... P-I,...
4% -,9..,... -,.-J,... 7,99J,... 7,JIK,... 7,.PJ,... JPP,...
5% -,8I.,... -,7KK,... -,.--,... 7,I87,... 7,7+-,... IIP,...
6% P,7P.,... -,PK+,... -,7I+,... 7,+-P,... 7,P.+,... KK+,...
7% P,78K,... -,J7+,... -,78I,... 7,+8-,... 7,PJI,... K8J,...
8% P,-K9,... -,JJK,... -,-P7,... 7,9-P,... 7,PKK,... +I-,...
9% P,P7.,... -,JKI,... -,-I9,... 7,9P+,... 7,J8I,... 9+I,...
10% P,PJ.,... -,J8J,... -,-9K,... 7,9JP,... 7,I-P,... 8PI,...

This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
198-088 -6-

Exhibit 3 U;52(>5"<%/';5%0"*%o=25%B'*%\2BB"*"=5%:*2E";RT*><";%>=<%r'@G("

Coffee Grade D C B BB A AA AAA

Prices per kilogram 8,800 19,500 26,600 30,000 35,500 39,000 42,600

Unit cost (liras) 6,600 12,485 14,275 16,288 17,791 19,166 20,441
Fixed costs (thousands of liras)* 3,319,500 4,100,500 4,100,500 4,100,500 4,100,500 4,100,500 4,100,500

Volume COST PER UNIT

400,000 7J,988 --,+PK -J,I-K -K,IP8 -9,.J- -8,J7+ P.,K8-
600,000 7-,7PP 78,P78 -7,7.8 -P,7-- -J,K-I -K,... -+,-+I
800,000 7.,+J8 7+,K77 78,J.7 -7,J7J --,87+ -J,-8- -I,IK+
1,000,000 8,8-. 7K,I9K 79,P+K -.,P98 -7,98- -P,-K+ -J,IJ-
1,200,000 8,PKK 7I,8.- 7+,K8- 78,+.I -7,-.9 --,I9P
1,400,000 9,8+7 7I,J7J 7+,-.J 78,-7+ -.,+-. --,.8I
1,600,000 9,K+I 7I,.J9 7K,9P9 79,9I7 -.,PIJ -7,+-8
1,800,000 9,JJJ 7J,+KP 7K,IIP 79,IKK -.,.K8
2,000,000 9,-K. 7J,IPI 7K,P-I 79,PP9 78,9J7
2,200,000 9,7.8 7J,PJ8 7K,7P8 79,7I-
2,400,000 +,89P 7J,78J 7I,89J 7+,88+
2,600,000 +,9++ 7J,.K- 7I,9I-
2,800,000 +,+9K 7P,8J8
3,000,000 +,+.+ 7P,9I-
3,200,000 +,KP+ 7P,+KK
3,400,000 +,I+K 7P,K87
6,000,000 +,7IP

n%?2Z"<%E';5;%B'*%0*"(2G(%E'BB"";%2=E@G<"%0*2#>5"%)*>=<%B2Z"<%E';5;$

This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
Cafes Monte Bianco: Building a Profit Plan 198-088

Exhibit 4 M>@";%\G*2=3%-...

Year 2000 Sales Private Sales Premium Percent

(kilograms) (kilograms) of Total

%s>=G>*1 97,+8- 9J,87K +$7k

%?")*G>*1 7.P,K9. 7.+,KJ. 8$.k
%N>*E4 7PI,8PK 7J7,7-9 77$9k
%O0*2@ 9K,J.. 98,+.. +$Ik
%N>1 8P,P7- 8K,9+K 9$7k
%sG=" I+,K.. I8,9.. I$.k
%sG@1 J9,P9J I.,-P- J$-k
%OG3G;5 P9,.7K P8,JK9 P$Pk
%M"05"()"* +9,PPK 97,P-9 K$9k
%VE5')"* 7I.,87- 7IK,K+K 7P$7k
%&'#"()"* 7P8,P8- 7JJ,+7K 7-$7k
%\"E"()"* 7P9,-J. 7JP,I-. 7-$.k

7,7I-,... 7,78K,... 7..$.k

7
This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.
 For the exclusive use of V. Mai, 2017.
198-088 -8-

Exhibit 5 \2='Y;%:*'<GE52'=%:@>=%B'*%:*2#>5"%L*>=<%V=@1

Capacity Production Inventory Sales 2000 Actual

Private Private Private Sales Percent

X=252>@%X=#"=5'*1 %7+J,...
s>=G>*1 %I..,... %%%%%%%%%%I..,... %%%%%%%%%%%-J9,... %%%%%%%%%%%J-K,... +$7k
?")*G>*1 %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%-.9,... %%%%%%%%%%IJ.,... 8$.k
N>*E4 %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... H %%%%%%%%%%%+.9,... 77$9k
O0*2@ %%%%%%%%%%%I..,... %%%%%%%%%%%JI.,... H %%%%%%%%%%%JI.,... +$Ik
N>1 %%%%%%%%%%%I..,... %%%%%%%%%%%J9K,... H %%%%%%%%%%%J9K,... 9$7k
sG=" %%%%%%%%%%%I..,... %%%%%%%%%%%P8.,... %%%%%%%%%%%%%8.,... %%%%%%%%%%%P..,... I$.k
sG@1 %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%PP9,... %%%%%%%%%%%-I-,... J$-k
OG3G;5 %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%KJ.,... %%%%%%%%%%%789,... P$Pk
M"05"()"* %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%+P-,... %%%%%%%%%%%J.9,... K$9k
VE5')"* %%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%JJK,... %%%%%%%%%%%+9K,... 7P$7k
&'#"()"* %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... %%%%%%%%%%%--.,... %%%%%%%%%%%+-K,... 7-$7k
\"E"()"* %%%%%%%%%%%I..,... %%%%%%%%%%%I..,... H %%%%%%%%%%%+-.,... 7-$.k

%%%%%%%%K,...,... %%%%%%%%I,9-K,... H %%%%%%%%K,...,... 7..$.k

This document is authorized for use only by Vu Phuong Nguyen Mai in Management Control & Finance taught by Federica Ricceri, HE OTHER from November 2017 to December 2017.