Euroland Foods

EUROLAND FOODS S.A.

CASE STUDY

JOSHUA STOWERS

FIN 470

EUROLAND FOODS S.A.

The Euroland Foods case study presents the outline of the company as of 2001. The company had been struggling to move from its static position in the market and had intentions of investing in a range of projects in an attempt to continue market expansion. Due to the fact that Euroland was severely over leveraged, the capital budget for the future investments was set below the total cost of all the projects considered. This was done in an attempt to lower the debt-to-equity ratio the company recognized on the financial statements. The following analysis of the case study will provide an overview of the company, outline the proposed investments, and establish the most profitable course of action to take while staying within the proposed capital budget.

Euroland Foods S.A. is a multinational corporation in the business of ice cream, yogurt, juice and bottled water production. It was established by Theo Verdin in 1924 with the intentions of being a subsector of his dairy company. Mr. Verdin used his abilities in the development of new products and aggressive marketing to build his business throughout the decades. Euroland became large enough to go public in 1979, and was traded on the Brussels, London and Frankfurt exchanges by 1993. As of 2000, they were recognizing sales of over 1.5 billion euros annually.

The primary markets for Euroland are located in Scandinavia, the Netherlands, western Germany, Luxembourg, northern France, Britain. They also operated in Belgium, the location of Euroland Foods' headquarters. The primary revenue generator for Euroland is the sale of ice cream, which accounts for 60% of sales. Yogurt sales equal 20% of total revenue, leaving the remaining 20% split evenly between fruit juice and bottled water sales. The ice cream sales were driven by a customer base that remained loyal to the brand, due to the high butterfat content, and the range of...