Back to full throttle

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By optimising the costs and increasing the yield, GHK ensured the continued availability of a brand product that is famed and popular throughout Germany. GHK designed the change process in such a way that it will be supported on a long-term basis by the employees of all hierarchy levels.

Since the restructuring, the brand's market share has continually grown by one or two percentage points a year. For three years in a row, the company has generated profits in the seven-figure range.

About the project

A medium-sized company markets an extensive portfolio of attractive branded fruit drinks to food retailers. With its premium brand, the company is one of Germany's leading manufacturers of fruit juice. At three locations, the company's approximately 320 employees generate revenue of about €250 million a year. The customers are located primarily in Germany, but also in other European countries.

After three years of losses, the company was no longer able to cope with the negative EBIT of about €10 million. No long-term improvement was in sight. Though there was still enough liquidity, the banks indicated that they would cut their credit lines if the losses continued. The company's going concern was severely endangered.

As the company did not have the know-how required for successful restructuring, it looked for a restructuring expert who would be able to lead the company back into the profit zone. GHK was chosen because the consultancy would not merely optimize costs, but would also help to maximise the yield. This was essential for the restructuring measures to have a sustainable impact. In the course of the project, it was seen that apart from the financial perspective, the company was also in need of optimisation at the human level. The management needed to develop more team spirit, and mind changes had to be effected throughout the company.

"Focus Plus" – three steps on the road to success

With the restructuring programme "Focus Plus", GHK performed three steps to lead the company to success: (1) analysis, (2) action plan and (3) execution.

Analysis

In the first step, the analysis, GHK already identified a potential of €10.8 million, which could be realised within a year. However, the actual figures for the previous month only became available 8-10 weeks after the end of the reporting month. An ERP project that was to serve as a central governance instrument was still in its beginnings. There was an acute lack of active project management. Moreover, there was no informative contribution margin analysis, cost centre accounting and cost object controlling.

An ERP system was necessary to speedily determine which products provide a positive contribution margin and which ones do not. This information was especially important in order to identify products with a negative contribution margin and streamline the product portfolio, resulting in a reduction of costs. At the same time, the ERP revealed the products whose sales had to be increased in order to return into the profit zone. Moreover, the key to increased yield was to focus on the brand.

Clear action plan

The GHK action plan comprised optimisations along the entire value chain. With respect to the costs, this included the reduction of the purchasing, overhead and production site costs. Higher returns were generated by optimising the brand, the trading brand and the field of R&D. All steps were taken in close collaboration with the teams of the individual departments in order to make use of the employees' know-how to drive the team spirit.

Changing the mindset required dexterity, as accustomed processes had to be re-examined. For example, outsourcing the warehouse was a new approach that would reduce the internal workload. A new governance model was another important step on the way back into the profit zone: instead of the quantity, the focus was shifted to the revenue and profit per product. In the course of the change process, the cost awareness was also improved. Additionally, regular management meetings with clear structures contributed to a positive result and an improved team spirit.

Execution – GHK joins forces

The consultants of GHK assumed responsibility as interim CRO and CFO. They developed a concept comprising strategic consulting, sales orientation and operational assistance in transforming the organisation. The implementation of the ERP system was crucial for the corporate governance, as it enables a contribution margin analysis, cost centre accounting and cost object controlling.

Subtargets were defined to get the project started. For example, the purchasing department was instructed to save costs amounting to €1 million by comparing at least three offers.

 

Talks with investors ensured the needed liquidity. The positions of the head of controlling and the head of accounting were consolidated in order to avoid unnecessary decision-making routes. GHK bridged manpower bottlenecks with its own staff in order to speed up the restructuring measures.

The strengthening of the brand represented the core of the restructuring measures. GHK optimized the portfolio with the help of a CM1 calculation. The goal was to determine the brand's pricing in order to ensure sales at prices that cover the costs. At the same time, the sales support in the food retail area was stepped up. By means of systematic sales and advertising campaigns, the brand's revenue improved.

Back into the profit zone

Thanks to the restructuring by GHK, the company managed to improve its EBIT from -€10 million to +€1 million within one year. Within three years, the revenue went up from €200 million to €256 million.

By means of a holistic approach that focused both on cost optimisation and increased yield, GHK established the basis for sustainable, positive economic performance. The employees have kept their jobs and operate with higher cost awareness. The resources are more effectively aligned with the brand.

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