Learn how Third Horizon helped a leading beverage company overcome production constraints through a rigorous analysis and subsequent shakeout of underperforming products.
Through ongoing acquisition of brands and development of new products within existing brands, this leading alcoholic beverages company had more than 150 different products on the market.
The level of product diversity was putting pressure on production facilities and adding business complexity.
It needed to rationalise its cluttered product range – and called on Third Horizon’s expertise to do it.
We supported the business as it established a process to identify products that were not meeting pre-determined criteria.
We began by identifying operational cost drivers in the manufacturing process and allocating them directly to products to increase the accuracy of profit measures.
We then developed a business process to measure products against pre-determined profitability thresholds and qualitative strategic criteria. Profitability measures between new product business cases and product elimination were aligned to ensure consistency.
The result was a framework to remove unprofitable, non-strategic products from the portfolio – and to improve the profitability of strategic under-performing products.
The process was designed with in-built flexibility to accommodate future changes to profitability thresholds and strategic criteria.
After the initial process was successfully completed within four-weeks.
Unprofitable, non-strategic products – representing 20 per cent of all active products – would be removed from the portfolio over a six-month period.
Action plans were developed to improve the performance of the 15 per cent of underperforming products identified as strategic.
The changes resulted in the release of 6 per cent of production capacity – achieving the client’s aim to reduce pressure on facilities.