...Hansson Private LabelHansson Private LabelHansson Private 1. How would you describe HPL and its position within the private label personal care industry? HPL is a mid-sized private label manufacturer of personal care goods. In 1992, the company acquired production assets from Simons Health and Beauty Products, and through increased efficiency had enjoyed growth within the sector. The company’s production is estimated to account for about 28% of the $4 billion sold in their product category, generating revenue of $681 million in 2007. The company was recently presented an opportunity by its largest retail customer to significantly increase its share in their private label manufacturing. The prospect of growth was risky, since it required an initial investment larger than any HPL had previously encountered. The 3-year contract offered was also relatively short. The company would be running the risk of discontinued business after expiration and subsequent heavy losses. However, the upside was obvious. If the company succeeds by locking in long-term business with a powerful retailer, it will surely pay off for many years to come. A special quality of the private label business is that manufacturers generally produce at levels demanded by the retailers they produce for. Even though private labels have been steadily gaining market penetration due to quality improvements, growth in the overall market were modest, leaving manufacturers little opportunities for big investments. Therefore...
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...Britt Sturm Cases in Managerial Finance Dr. Morris November 9th, 2015 Hansson Private Label, Inc. (Pg. 151) 1. How would you describe HPL and its position within the private label personal care industry? Hansson Private Label, Inc., (HPL) founded by Tucker Hansson in 1992 when he decided to purchase the manufacturing assets of Simon Health and Beauty Products. Hansson had background in branded personal care products and wanted to change his position in the market place. The personal care industry includes products such as, hand and body care, personal hygiene, oral hygiene, and skin care. U.S sales of this industry totaled $21.6 billion in 2007. The private label personal care industry is driven by five primary categories: mass merchants such as Walmart, club stores such as Sams Club and Costco, supermarkets such as Kroger, drug stores such as, Walmart and CVS, and lastly, dollar stores. Manufactures had to persuade large chains to carry their product in such a highly competitive market. In order to better serve this highly competitive market, Hanson bought HPL for $42 million with, $25 million of his own money, and $17 million of money that he borrowed. Overtime, HPL grew at a conservative rate but had become a leader in the private label industry with four plants, which were all operating at 90% of capacity. HPL serves most of the major national and regional retailers as customers and has a dominant presence in the marketplace. 2. Using Exhibit 5 assumptions...
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...The industry within which Hansson Private Label exists is a very competitive and volatile one. It is dominated by two types of firms, namely, Branded and Private Labels. Tucker Hansson operates as a private label firm. Private Label firms are an emerging market which is competitive based on its ability to have a lower price than its rivals. This market has experienced growth primarily because of this affordability. However this growth would be regarded as organic. Based on analysis of the financials, HPL is an excellent business and shows maintainable and sustained growth. There has been growth in the areas of revenue, current assets, owner’s equity, sales and net working capital. As shown in Exhibit 4, sales across HPL retail channels increased year over year in the areas of mass merchants, grocery, club, drug, dollar stores and miscellaneous distributors. Groceries increased or remained constant during the 5-year period. Long term debt experienced a decrease each year. Exhibit 1 shows that operating revenues have increased from $503.4M in 2003 to $680.7M in 2007. During this time, gross operating profit increased by $23.4M. This illustrates that the company is not sacrificing profits for top level growth. One disadvantage is that the company is operating at 90% of capacity and addition of more accounts will necessitate investment in expansion. After reviewing the case a number of risks need to be considered. These risks would fall into two main categories, namely...
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...Hansson Private Label | ACF - I | 1. How would you describe HPL and its position within the private label personal care industry? HPL manufactures personal care products that are sold under the band label by other companies. The company has stable whole sales growth rate and has become successful by efficient manufacturing, good expense management and appropriate customer service. In the recent years, the company has been facing a great amount of competition in the private label industry. In conjunction with competition, the industry has been experiencing slow growth, with unit volume sales increasing less that 1% over the past four years. Even with those factors, the company has a solid foothold in the market; according to its financial statements, HPL is estimated to have a 28% share out of its industry with revenues in 2007 reaching $681 million. The competition in the private label manufacturers is from brand name manufacturers, but the private label industry is offering better prices and quality, which is more appealing to consumers. Expansion would be beneficial for HPL; the company’s current four plants are at 90% capacity so expanding will be required in the future regardless. Even though HPL has a share of 28% in the industry, it is not the leader but establishing a contract with a strong retailer could help bolster the company’s position. But a contract of this magnitude would expose HPL to any financial stress the contractor could potentially face. If for...
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...Hansson Private Label Directions Fin 3150 Dr. R. Abraham There is a proposal for a $ 50 million expansion for Hanson Private Label or HPL. HPL manufactured personal care products such as sop, shampoo and mouthwash The proposed expansion is HPL’s response to a retail customer’s desire to expand HPL’s share of their private label manufacturing. Consider the firm’s overall competitive strategy and proceed as follows: 1. How would you describe HPL and its position within the private label personal care industry ? HPL is a private label manufacturer of personal care goods. HPL is a private label manufacturer of personal care goods. They started in 1992 with the purchase of Simons Health and Beauty Products. In 2007, they generated $681 million in revenue. The company’s production is estimated to account for about 28% of the $4 billion sold in their product category. HPL was offered the opportunity to significantly increase its share in private label manufacturing by its largest retail customer. It involved quite a bit of risk. It was the largest investment they had seen and it called for a 3-year contract, which is considered short. Termination of business after expiration of the contract and ensuing heavy losses were some of the risk involved. If the company were to succeed, they could ensure long-term business with a powerful retailer. A special quality of the private label business is that manufacturers generally produce at levels demanded by the retailers they produce...
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...Case – Hansson Private Label, Inc. Question 1: How would you describe HPL and its position within the private label personal care industry? HPL started in 1992, manufacturing personal care products – soap, shampoo, mouthwash, shaving, cream, sunscreen and etc., and selling them under the brand label of HPL’s retail partners, which includes supermarkets, drag stores, and mass merchants. It is a conservative company similar to other private label manufacturers since the have never had major expansion plan in the past and the only investment opportunities they had evaluated are incremental new product types. They also tend keep the debt at the modest level with facility over 60% of capacity utilization. HPL is a major supplier for retailers’ private label of personal care products for the company’s $680.7K sales accounts for 28% of $2.4 billion whole sales from retailer’s personal care market. However, if compare to the whole $21.6 billion personal care market, HPL’s share within the retailer’s total $4 billion sales market size accounts for 3% of the industry. Question 2: Using assumptions made by Executive VP of Manufacturing, Robert Gates, estimate the project’s FCFs. Are Gates’ projections realistic? If not what changes might you incorporate? Please see Table 1 for the calculation based on Gate’s estimation. FCF = Free Cash Flow = Operation CF - Capital expenditure = EBIT (1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital – Capital...
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...Case Study: Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility Final Project by Rodrigo Montechiari Company´s Business Operations, Strategy and Past Performance HPL is a manufacturer of personal care products for retail partners. Its strategy has always been to focus on efficiency, cost control and customer relation to guarantee solid revenue grows until 2007. Expansions have always been carefully analyzed and the Company never worked below 60% capacity utilization. HPL has been able to grow its revenues to $ 681 million in 2007 accounting for 28% of national consumption but the Company is working close to maximum capacity. On the other way, its performance on units sold is growing only at 1% per year and, since capacity utilization averages 90%, there is no room for further increase in revenues if not through expansion to a new facility. The Business Opportunity Facing four years of low growth rates and fierce competition, HPL has the opportunity to expand its production and increase its margins by signing a 3 years term contract with its biggest Client on the personal care products line. The opportunity has its risks. An initial investment of USD 45 million will be necessary and the Client, who is already HPL biggest one, only commits to a 3 year term contract. In addition, the necessary investment would double HPL debit and significantly increase its financial leverage. Consequently, any financial distress form the client would...
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...Case Study: Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility Company Background Hansson Private Label, Inc (HPL) is a private company in the business of manufacturing personal care products for retail partners. The company started its business in 1992 via the acquisition of manufacturing assets from Simon Health and Beauty Products by US$ 42 million. The US$ 25 million equity portion in the acquisition deal was a demonstration of the level of entrepreneurism of Mr. Hansson, the business owner. According to Mr. Hansson´s evaluation, the acquisition was risky because of the concentration of his wealth in one single investment. But he also believed that the assets were purchased by less than its replacement value. During its first 15 years the Company focused on efficiency, cost control and customer relation, being able to expand its business nationwide and grow its revenues to $ 681 million in 2007 (28% market share from national consumption of $ 21.6 billion). But during the period 2004-2007 the market share by volume was stable, averaging a yearly growth rate of 1% while the market share by dollar sales averaged 1.7% yearly growth. The 0.7% gap would represent the average yearly inflation for the industry. The Company currently has four plants operating above 90% capacity. Expansion has always been approached conservatively and all new operations always commenced with a minimum 60% capacity utilization. Industry Overview ...
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...Marijan Jurac Chelikani – FIN 310 LIBOR Report * After reading the report on LIBOR reform I was first trying to get a sense about what LIBOR did exactly and what were the issues that it had brought forth to call for the reform. The further I read, the more I began to understand the pros and cons of a having LIBOR. Unfortunately I personally found that there were actually more cons than pros. * * As mentioned in the report LIBOR has been the catalyst for fraud and unfair play in the past years. This being said I cannot see this reform in LIBOR go the right way for either party. The FED might have already lost the trust of many people around the world with the scandals of late that have taken place. Many people were hurt when they took out loans and LIBOR was artificially high. However, when LIBOR was artificially low people paid less than they should have. This is a small example on the controversy of whether or not LIBOR should be reformed or completely thrown out the window. * * LIBOR is a very important index, which serves as a benchmark for derivatives. Being the most widely used interested rate in the world, it is not easy to just throw it out the window, as many people who were on the brunt of the scandal would wish. * * I believe that LIBOR is not as risk-free as we think it is. I believe that the scandals that were taken place proved that. Many people lost their savings and not only were the savings lost, but the banks that...
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...1. HPL Position in Industry Hansson Private Label (HPL) is a manufacturer of private label personal care product. In the recent years, the company has been facing a great amount of competition in the private label industry. In conjunction with competition, the industry has been experiencing slow growth, with unit volume sales increasing less that 1% over the past four years. Even with those factors, the company has a solid foothold in the market; according to its financial statements, HPL is estimated to have a 28% share out of its industry with revenues in 2007 reaching $681 million. The competition the private label manufacturers face is from brand name manufacturers, but the private label industry is offering better prices and quality, which is more appealing to consumers. Expansion would be beneficial for HPL; the company’s current four plants are at 90% capacity so expanding will be required in the future regardless. Even though HPL has a share of 28% in the industry, it is not the leader but establishing a contract with a strong retailer could help bolster the company’s position. But a contract of this magnitude would expose HPL to any financial stress the contractor could potentially face. If for any reason the contractor defaults, it would greatly impact HPL as well since a large portion of their income will depend on the contract. HPL also needs to prepare for what will happen at the end of the three years when the contract is finished. The expanded facilities...
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...Case Study: Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility Company´s Business Operations, Strategy and Past Performance HPL is a manufacturer of personal care products for retail partners. Its strategy has always been to focus on efficiency, cost control and customer relation to guarantee solid revenue grows until 2007. Expansions have always been carefully analyzed and the Company never worked below 60% capacity utilization. HPL has been able to grow its revenues to $ 681 million in 2007 accounting for 28% of national consumption but the Company is working close to maximum capacity. On the other way, its performance on units sold is growing only at 1% per year and, since capacity utilization averages 90%, there is no room for further increase in revenues if not through expansion to a new facility. The Business Opportunity Facing four years of low growth rates and fierce competition, HPL has the opportunity to expand its production and increase its margins by signing a 3 years term contract with its biggest Client on the personal care products line. The opportunity has its risks. An initial investment of USD 45 million will be necessary and the Client, who is already HPL biggest one, only commits to a 3 year term contract. In addition, the necessary investment would double HPL debit and significantly increase its financial leverage. Consequently, any financial distress form the client would seriously jeopardize HPL´s financial...
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...Overview of the Industry As a manufacture of private label personal care products, Hansson Private Label, Inc. has a considerable amount (28%) of market share in its specific industry. However, private labels as a whole constitute less than 19% in the entire personal care industry. Therefore, growth of HPL depends on the growth of the industry and more importantly the growth of private label component within the industry. In terms of the personal care industry, market growth will not improve significantly in the future. As proven in the past four years, unit volumes in the industry increases less than 1% in each year and the dollar sales growth was only driven by modest price increases. Therefore, the opportunity for private labels will come in the form of obtaining a bigger slice of the pie. In other words, private labels will need to take market shares away from the brand names by penetrating deeper into a slowly expanding market. Brand name manufactures still control the majority of the personal care market. However, private labels have been gaining momentum in market shares as a result of greater consumer acceptance. The economic downturns have fostered a trend of thrifty spending among consumers. The private labels, with lower price and improving quality, offer an appealing alternative and substitute to the more costly brand names. Therefore, despite the whole personal care market size being quite fixed, the private labels have the prospect of growing within the...
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...ANTECEDENTES HLP, se inicio en 1992 cuando Trucker Hansson compro la mayor parte de los activos de la fabricación de Simon Health & Beauty Products, HLP se compro por 42 millones, Hansson trato de sacar provecho a la alza de productos de marca propia aumentando su participación en la venta de productos al consumidor. Aunque Hansson tenía una fuerte y la mayor parte de su riqueza invertido en HLP, creía que estaba pagando mucho menos que por los costos de reposición de activos y confiaba en el crecimiento de la marca propia aumentaría sin cesar, gracias a su persistente enfoque en la eficiencia de fabricación, gestión de gastos y servicio al cliente convirtió HLP en un éxito ya que ahora se cuenta con la mayoría de los clientes nacionales y regionales. HLP, Fabrica productos para el cuidado personal, la firma cuyas ventas habían crecido considerablemente a lo largo de los años genero US$681 millones en ingresos en 2007, sus principales clientes eran supermercados, farmacias y tiendas de autoservicio. Por ahora se tenían 4 plantas todas operando al 90% de su capacidad, la deuda estaba a un nivel modesto para contener riesgo de dificultades financieras PROBLEMA Inversión de 50 millones de dólares para ampliar la capacidad de producción en HPL, con esto se incrementaría la deuda con costo pero se incrementaría considerablemente la concentración de clientes, además se crearía un valor significativo para la marca y un crecimiento rápido. ALTERNATIVAS (de por qué si invertir...
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...REV: MARCH 1, 2010 ERIK STAFFORD JOEL L. HEILPRIN JEFFREY DEVOLDER Hansson Private Label, Inc.: Evaluating an Investment in Expansion Introduction On a frigid Sunday night in late February 2008, Tucker Hansson pored over a proposal developed by his firm’s manufacturing team. It called for investing $50 million to expand production capacity at Hansson Private Label (Hansson or HPL). For Hansson, a private company, this would be a significant investment. The company had not initiated a project of that magnitude for more than a decade, and the expansion wasn’t without significant risk. It would be likely to double HPL’s debt and to greatly increase customer concentration. This was a critical juncture for the firm Tucker Hansson had carefully built over 15 years. He wondered whether the return on investment would be large enough to justify the effort and risk. He also wondered about the best means of evaluating the potential investment. HPL manufactured personal care products—soap, shampoo, mouthwash, shaving cream, sunscreen, and the like—all sold under the brand label of one or another of HPL’s retail partners, which included supermarkets, drug stores, and mass merchants. The firm, whose sales had grown steadily over the years, generated $681 million in revenue in 2007. Three weeks earlier, HPL’s largest retail customer had told Hansson that it wanted to significantly increase HPL’s share of their private label manufacturing. Given that HPL was already operating near full capacity...
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...prospective investments. Swensen had every reason to feel content, despite his recent injury. The endowment had just completed another spectacular year, having grown to $18 billion (up from $1 billion when he had taken over the office). Yale had developed a rather different approach to endowment management, including substantial investments in less efficient equity markets such as private equity (venture capital and buyouts), real assets (real estate, timber, oil and gas), and “absolute-return” investing. This approach had generated successful, indeed enviable, returns. Swensen and his staff were proud of the record that they had compiled and believed that Yale should probably focus even more of its efforts and assets in these less efficient markets. But his thoughts turned to the larger challenges associated with the management of the university’s endowment. The very success of their strategy had generated new questions. How far did they think Yale should or could go in this direction? How should they respond to the growing popularity of the approach they had chosen? Given the turbulent times that private equity funds were facing, should this asset class continue to play an integral role in Yale’s portfolio? Background1 Ten Connecticut clergymen established Yale in 1701. Over its first century, the college relied on the generosity of...
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