Monforte

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Analysis

Monforte is in high leveraged position; therefore, it is not appropriate for the company to buys its own building in 2008 for $400,000. In appearance, it saves $15,498 a year in average for rent expense to purchase the building, but from break-even aspect, it requires Monforte to use the building for 25.8 years in order to payback the cost. However, Monforte financed the building payment through customers by selling cheese vouchers at a discount price and it requires repaying the $400,000 in five years instead of 25.8 years which creates high risk for the company. Also, Monforte only has few production occurred during 2009 due to the move which means the sales revenue in 2010 will most likely from redemption of the vouchers. Monforte’s cash inflow will be much less and it will cause a serious financing problem.

Affinage Service

Monforte will dominate the Affinage service market where it enters with competition advantage because no company provides the service in Ontario. Monforte will be able to gain a large market share and it could generate 70% favorable gross margin. Due to the improvement of the cheese’s quality, Monforte will be able to sell it at a premium price so that an addition of $1,770,000 in sales will occur at break-even point (Exhibit 1). Most likely Monforte will reach the target sales, but they should not consider this as the growth alternative because the payback period is way too long when Klahsen focuses the growth in 2010. It requires a payback time of 5.30 years due to the breakeven units of 177,000 and the capacity for aging cheese is maximum 33,000 units in each 10 months period.

Charcuterie

Monforte will create high risk to expand the business by establishing new product line, such as charcuterie, since Klahsen does not have any experience and knowledge towards the market. While the market is totally an unrelated business to cheese making, it is time consuming for Klahsen to have an appropriate and effective market...