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Case name: Frozen food performance

Use: Mock interviews
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Case summary

Industry Consumer/retail Agnostic (originally US)

Case geography
(case name)
Business Profitability Calendar year(s) 2010
problem type of actual project
The client is a national supermarket chain positioned among the top 3 players in its market. The client has
historically been able to maintain above average profit margins, serving as a benchmark for the industry.

However, the client has identified a troublesome trend in its frozen food section. Profits have been declining
steadily in the past year while other competitors have been able to maintain or even improve their margins.

Description of The client came to us because it wanted to understand what is driving its profitability decline in the frozen food
the business section and identify possible solutions.
problem

eserved.
(upfront set-up)

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1. What is going wrong that has made profits in the frozen food section suddenly decline?
Case questions 2. What are some ideas you could think of that would help turn around this situation?
to solve

1. The source of the issues is frozen pizza; the client has been pushing value brands by aggressively reducing
Case insight & prices -- resulting in lower overall category sales and profit
profit.

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recommendation 2. Key recommendations: reduce emphasis on value brands (for example: by increasing price, reducing
promotion, placing in less favorable shelf location, reducing the range of the assortment, etc)

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Case roadmap

Roadmap Key insights and interim answers

0 • I first provide the case setup (1 min)

• I start by asking the candidate how s/he would approach the client's • The candidate clearly identifies profit drivers and external factors
1 frozen food problem. I want the candidate to show an understanding of
key drivers of profitability and depth of thinking beyond canned "Profit =
Revenue – Cost" answer (1-2 min)

2 • I ask the candidate where s/he wants to start and why. Ideal is to start • Key insight is that focus should be on revenue /price side.
with revenues/price; if not, should quickly see no potential and redirect Since this is not clear from the set up, candidate should drive
themselves to revenue/price. If not, I will redirect (3-4 min) potential paths and quickly confirm or redirect based on data

eserved.
• Once the candidate defines a suggested path, I ask him/her to dive- • The candidate is able to generate hypotheses on specific
3

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deep on pricing and hypothesize what could be driving issue (2-3
(2 3 min) potential issues (e.g.
(e g competition lowered the price,
price the product
mix has changed, promotions are run differently, etc)

• I then share exhibit 1 and ask for observations and what the change in • Ex. 1 = Units up, while $ sales down. Frozen pizza is the largest
4 revenue is by product. If s/he doesn't ask for more information on category and the only one where price change resulted in lower
frozen pizza, I suggest that path (4-6 min) sales – 45 down to 42

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• I give the candidate exhibit 2 and ask him/her to evaluate the different • Ex. 2 = retailer reduced price of value brand, by 33% resulting in
5 frozen pizza brands and calculate the change in price (3-5 min) sales shifting from other brands (but lower overall)

• I then ask what this means for the business to see how a candidate • Value brand stole units from A and B, at a lower price but similar
6 incorporates multiple data points (2-3 min) cost (from before), which explains why profits fell

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• I finish
fi i h th
the case b
by asking
ki ththe candidate
did t to
t consider
id potential
t ti l solutions.
l ti • Ch
Changes iin pricing
i i strategy
t t ffor value
l b brand
d significantly
i ifi tl affected
ff t d
7 want the candidate to be able to summarize work succinctly and put dynamics. Assuming lost profit was not compensated in other
emphasis on what the client could do moving forward (1-2 min) sections with additional traffic, client should reverse decision

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Let me tell you a little bit about the client and the problem

The client is a national supermarket chain positioned among the top 3 players in its
market. The client has historically been able to maintain above average profit margins,
serving as a benchmark for the industry.

However, the client has identified a troublesome trend in its frozen food section. Profits
have been declining steadily in the past year while other competitors have been able to
maintain or even improve their margins.

Description of the The client came to us because it wanted to understand what is driving its profitability
business problem decline in the frozen food section and identify possible solutions.
(upfront set-up)

eserved.
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1. What is going wrong that has made profits in the frozen food section suddenly decline?
Case questions 2. What are some ideas you could think of that would help turn around this situation?

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t solve
to l

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How would you approach our client's question regarding
poor performance in the frozen food section?

Interviewer
thoughts Conversation with candidate
questions/

• How would you approach our client's question regarding poor performance in the frozen
Interview

set-up

food section?

Candidate uses Poor responses

canned "4Ps", or • I would like to look at pricing, products, place (distribution), and promotion
fails to recognize • I would look at the cost of the products
maini ddrivers,
i or • I wantt to
t understand
d t d if competitorstit are having
h i profit fit problems
bl as wellll
did not listen to
clues in set up
ested candidate rresponses

eserved.
Candidate Minimal threshold for adequate response
identifies key • I would like to start by looking at revenues and costs

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t i to
topics t review
i – The
Th kkey d drivers
i off changes
h iin revenues are price
i andd units
it sold
ld
• Rev, Costs – The key drivers of costs are fixed and variable costs
and • I'd also like to look at the client operations in frozen foods
additional
concepts

Ca d date
Candidate Additional
dd t o a and
a d exceptional
e cept o a responses
espo ses

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Sugge

engages on the • I would like to start by looking at revenues and costs

next level of – The key drivers of changes in revenues are price and units sold. Units are impacted
analysis, by prices but also by consumer preferences, out of stocks, changes in the store or
identifying drivers competition changing their strategy
for each variable – On the cost side, key drivers are fixed and variable costs. On the variable cost side,
I would like to look at changes in the supply chain of this product

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• I'd also
l lik
like tto llook
k att any changes
h iin our product
d t mix
i and
d compare our product
d t mix
i tto th
the
market/competition

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Where would you like to start and why?

Interviewer
Topic thoughts Suggested candidate questions Data provided upon request
Verify that the 1.I would like to look at revenue 1.Why? What in particular would you like to look
candidate has a 2.It seems like trends, pricing matter in frozen foods. I'd like to look at?
logical rationale to in particular at volume and pricing. Has the pricing gone down, 2.I have some data on this. We'll get into it in a
Revenue

look at revenue what about volume? moment. What else would you want to know
3.It could also have something to do with the product mix—have we about revenues?
seen changes across products offered? 3.Yes, I also have some data we can talk through
in a moment.
moment Is there anything else you would
want to know?

Redirect 1.I would like to look at costs 1.Why? What in particular would you like to look
candidate to 2.I'm assuming the client has less control over its costs than its at?

eserved.
revenues revenue/pricing, so maybe prices have gone up. There are both 2.I have some data on costs that we'll get into in a
fixed and variable costs
costs—II want to know if the client has seen any moment but I can tell you know that our client
moment,

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Costs

significant changes in either of these? has a similar cost structure to its competitors.
3.Well, since we know that our competitors are not seeing reduced 3.Ok, good thought. We'll get into the details soon.
profitability and we have the same cost structure as them, that
leads me to believe it is a revenue issue
store trendss

Redirect 1 I would like to understand how the rest of the market is doing
1.I 1.At
1 At the beginning,
beginning I mentioned the market is not

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Overall Markett

candidate to observing similar profitability issues.

revenues
Redirect 1.I would like to understand how the rest of the store is doing first 1.I can tell you that our client looked at this already
candidate to and confirmed that the issue is specific to the
revenues frozen food section.

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Poor Adequate Exceptional

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Let's talk about pricing a little more
If pricing were an issue for the client, what could be driving it? Please brainstorm some ideas...

Interviewer
thoughts Conversation with candidate
Look for • Let's talk about pricing. If pricing were an issue for the client, what could be driving it?
questions/
Interview

candidate's ability Please brainstorm some ideas...

set-up

to think originally
about the
problem
Unable to offer Poor responses
d t il b
details beyond d • Well,
W ll ththe client
li t may h
have changed
h d th
the price
i
original • If units went down, then profits went down
framework • I need to know the sales and costs to be able to answer that question
ested candidate responses

eserved.
Candidate offers Minimal threshold for adequate response
some detail and • The client may have been promoting more and thus reducing the average price

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original thinking • The client may have increased the price too much and customers decided to buy the
product somewhere else, which would explain why the market is not experiencing the
same problems

Candidate Additional and exceptional responses

engages in the • Same as above, plus...
exercise offering
exercise, • The client may have changed the products offered
offered, affecting the average price to the

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Sugge

multiple consumers... for example if they took out value frozen entrees and left only very
hypotheses. All premium frozen entrees on the shelf
are good as long • The client may have changed the products they promote
as they make • The client decided to carry larger/smaller sizes, thus affecting the average price
business sense • (example for units)The client changed something in its market strategy and is attracting a
different customer segment that is not interested in this product

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Now let's get into some data that you asked about
What do you takeaway from this? What is the change in revenue by product from 2013-2014?

Interviewer thoughts Conversation with candidate

questions/

Costs is a dead-end;; if • Here is a table summarizingg the financial results of the frozen food category.
g y
Interview
w

set-up

necessary, redirect candidates to • What do you takeaway from this?

revenue; Share Exhibit 1 • If necessary, what is the change in revenue by product from 2013-2014?

Unable to prioritize the most Poor responses

important driver of performance • What is in the "Other" sub-category? I am curious because we lost 10% of
volume and it is the only category where we lost volume
• I see we have costs here. I will compute total cost dollars as well
Suggested candidate responses

Accurately computes dollar sales Minimal threshold for adequate response

eserved.
and asks to look into frozen pizza • I have units sold and dollars per unit. I can multiply these two variables to see
the total dollars sold

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• Looking at total dollars, frozen pizza is the only class where we lost sales (45
down to 42). It is also the largest subcategory so I would like to see more details
here
• Frozen entrees and other are effectively unchanged at 21 and 22

Candidate identifies the patterns Additional and exceptional responses, second order insights reached
g and p
in volume change price • The first thing
g I notice is that frozen p
pizza makes up
p the about half the business

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change to decide frozen pizza is • Revenue went down 45 to 42. Frozen entrees and other are effectively
the problem unchanged at 21 and 22
• Also, the decrease in the price in frozen pizza is quite dramatic at more than
20%. I am curious to learn what happened here.

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Quantitative analysis calculations and solutions

Exhibit 1 Candidates should ask to
see more details for the
$ Sales by category frozen pizza category

(average per store)

% change % change
Units (K) Price ($/unit) Revenue units price
2013 2014 2013 2014 2013 2014 2013 vs 2014 2013 vs 2014
Frozen pizza 10 12 4.50 3.50 45 42 20% -22%

Frozen entrees 6 6.6 3.50 3.25 21 21.5 10% -7%

Other 5.5 5 4.00 4.50 22 22.5 -9% 13%

eserved.
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Frozen pizza
46% 51% 51% 49%
as % of total
Expected math work
Note: best candidates do not need to run all
Do not expect this the numbers. For example, by looking at the
math, just directional Average cost change in volume in frozen entrees (+10%)
answer (ie
(ie, "around
around Costs ($/unit) and noticing that price changed less than

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50%) 10%, candidate knows revenue went up
2013 2014
Frozen pizza 1.50 1.50
Candidates should
Frozen entrees 1.00 1.00 deprioritize this path.

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Costs have not
Other 3.90 3.90 changed

Note: Grey font represents calculations potential candidates could perform (not all are required. Many good candidates do not need to perform the math on paper)
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I have some additional data for you
What do you takeaway from this? What is the change in price from 2013-2014?

Interviewer
thoughts Conversation with candidate
questions/ set-

Looking for • Here is a breakdown of frozen pizza by brand. You can think of brand A and B as DiGiorno
candidate's ability and Red Baron, and the value brand would be a frozen pizza carrying the retailer name
Interview

to connect • What do you takeaway from this?

up

variables • What is the change in price from 2013-2014?

Candidate does Poor responses

not understand • Let me multiply volume by revenue and then we'll have the price
how to apply the
data, or makes
calculation
d candidate responses

eserved.
mistakes

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Candidate gets to Minimal threshold for adequate response
the answer • I have units sold and total revenue. I can calculate the average price for each brand
• I see brands A and B have not changed, but value brand prices went down significantly by
$1 or 33%
Suggested

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Candidate does Additional and exceptional responses, second order insights reached
the minimal math • Brands A and B have both lost unit sales while the value brand increased its unit sales
necessary to • The ratio of volume change and revenue change for brands A and B is constant, meaning
reach conclusion, price did not change
keeps in mind • For value brands, the price went down from $3 to $2. That is a 33% change.

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Quantitative analysis calculations and solutions

Exhibit 2

Frozen Pizza
Volume Revenue Price Change in price
(Units K) $ $/unit %

2013 2014 2013 2014 2013 2014 2013 vs 2014

Brand A 5 35
3.5 24 5
24.5 17 3
17.3 ~5 ~5 0%

Brand B 3 2.5 14.7 12.4 ~5 ~5 0%

eserved.
Value Brand 2 6 6 12.0 3 2 -33%

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TOTAL 10 12 45 42 4.5 3.5 22%

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Candidates should notice that
overall revenue went down
despite the significant increase in
value brand volume
Expected math work. Note: best candidates do
not need to run all the numbers. For example,
price change for Brands A and B should be
obvious immediately,
immediately and candidate should quickly

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focus on the price change of value brand and the
volume shift from A to B and C

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What does this analysis mean for the business?
From the data you have, what could explain the business decline for brands A and B?

Interviewer
thoughts Conversation with candidate
Looking for
questions/

• What does this analysis mean for the business? From the data you have, what could explain
Interview

set-up

candidate's ability to the business decline for brands A and B?

connect variables

Unable to complete Poor responses

the analysis • Brands A and B have lost a lot of business
business. I would like to see more data for them
e responses

eserved.
Accurately computes Minimal threshold for adequate response
dollar sales and • It looks like value brand stole units from A and B, at a lower price but similar cost (from

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asks
k tto look
l k iinto
t
gested candidate

before), which explains why profits fell

frozen pizza

Candidate identifies Additional and exceptional responses, second order insights reached
the patterns in • Do we know what happened with the value brand? Absent of any new data data, I believe the

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Sugg

volume change and client lowered the price to increase volume but that cannibalized higher price sales of A
revenue change to
and B, resulting in lower revenues
decide value brand
is the issue

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Can you summarize the recommendations we should make
to the client?

Interviewer
thoughts Conversation with candidate
questions/

If candidate asks for • OK – we have covered a lot of ground and looked at some interesting data. We only have one or two
Interview

set-up

time to prep, steer minutes left – let's discuss the summary of the situation and the recommendations we should make to
back to "elevator" the client
(only 1- 2 min so not
possible)
Unable to come up Poor responses
with solutions • Well... they should reverse what they did last year and increase prices of value brands
b
beyondd iincreasing
i • I don't
d ' know...
k
price of value
brands
ested candidate rresponses

Candidate offers Minimal threshold for adequate response

eserved.
some detail and The client lowered the price of value brands and ended up cannibalizing its branded frozen pizzas
original thinking • The main option is to increase prices of the value brand again

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• The client could also:
• try to promote brands A and B to see if it gets extra volume there
• negotiate better costs with the value brand manufacturer to compensate for the cannibalized
units of A and B
• de-emphasize value brand through shelf layout
Candidate engages Additional and exceptional responses
in the exercise, • (same as above +...)
offering multiple • Value brand showed significant price sensitivity
sensitivity. We should try to capitalize on itit... maybe instead of
Sugge

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ideas just reducing the price for everyone, the client could use a loyalty program to offer discounts to specific
customer segments
• We could identify which stores had more cannibalization issues and only change prices there, while
leaving low prices in stores that drove incremental units
• Instead of lowering the price of value brand, they could offer a volume discount (eg, buy 5 for the price
of 4) which ensures volume increases are enough to compensate for lower prices

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Transition to next activity: End of case
12
 PLEASE ENSURE ALL HANDOUTS PROVIDED TO STUDENTS ARE COLLECTED

Agenda

Exhibits Provided to the Candidates

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13
Revenues and costs by frozen food category
Sales by category
(average per store)
Units (K) Price ($/unit)

2013 2014 2013 2014

Frozen pizza 10 12 4.50 3.50

F
Frozen entrees
t 6 66
6.6 3 50
3.50 3 25
3.25

Other 5.5 5 4.00 4.50

eserved.
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Cost by category
Cost ($ / unit)

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2013 2014

Frozen pizza 1.50 1.50

Frozen entrees 1 00
1.00 1 00
1.00

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Other 3.90 3.90

14
Frozen pizza sales by brand
Pizza sales by brand
(average per store)
Units (K) Revenue ($K)

2013 2014 2013 2014

Brand A 5 3.5 24.5 17.3

B dB
Brand 3 25
2.5 14 7
14.7 12 4
12.4

Value Brand 2 6.0 6.0 12.0

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