Growth Without Capital

Situation

Explosive market growth was causing this $2 billion beverage company growing pains. The $40MM capital expansion plan had put a strain on resources, both human and financial, and the executive team was worried. Bringing 3 new facilities on-line each year was distracting management from ensuring that their existing assets were generating sufficient return on investment.

Complications

Although everyone agreed that eventually the market would mature and growth would slow, there was very little agreement on when that would be. Excess capacity in a mature market- place has been the downfall of many good business models and this made the executive team nervous about their aggressive capital expansion plan. On the flip side, they wanted to ensure that they captured as much of the growing market as possible.

"I am worried that we are complacent about the performance of our existing assets - the consequence of underperforming assets once the market matures could be disastrous."
VP of Supply Chain

Results

Within 6 months, the performance of their five largest facilities had been improved by 10-30% - the worst performing facility became the best performer! The possibility of dramatic improvement in any facility changed the client's entire business strategy. Instead of relying on additional capital to keep pace with predicted demand, they could also plan for large improvements in key assets. As a result, capital expansion plans were slowed and existing facilities became more profitable leading to a significant enhancement to the company's cash flow.