Beech Nut Case

In: Business and Management

Submitted By adrian04
Words 674
Pages 3
Proposed Merger Between Heinz and Beech-Nut

6/16/2012

EMT 606 - Heinz - Beech-Nut Merger Case

1

Is the Merger necessary to develop efficiency ?
Supporting Argument #1
Efficient plants & efficient distribution system

Better Recipe Saving in terms of operating costs and salary expenses between 9.4 million to 12 million.
6/16/2012 EMT 606 - Heinz - Beech-Nut Merger Case 2

Is the Merger necessary to develop efficiency ?
Flaws in argument

Heinz could achieve the efficiency of merger without eliminating Beach Nut as competitor. Although beach nut has inefficient distribution system , it can enhance it without merger.
6/16/2012 EMT 606 - Heinz - Beech-Nut Merger Case 3

Is the Merger necessary to develop efficiency ?
Supporting Argument #2

G -100%

Heinz -40%

Beech-Nut – 45%

Lacks a sufficient shelf presence or All Commodity Volume (ACV). Heinz and Beech-Nut claim new product launches are cost-effective only when a firm's ACV is 70% or greater
6/16/2012 EMT 606 - Heinz - Beech-Nut Merger Case 4

Is the Merger necessary to develop efficiency ?
Flaws in argument
All that the chart plotted was revenue against ACV ,Because the graph did not plot the profitability , does not prove that 70% ACV is required for a launch to be "successful" in an economic sense. The number of data points on the chart was few; they were limited to launches in a single year. They involved launches of all new grocery products rather than of baby food alone.
6/16/2012 EMT 606 - Heinz - Beech-Nut Merger Case 5

Arguments Supporting AntiCompetitiveness of Merger
Pre-Merger
Company Gerber Heinz Beech-Nut Other Total Market Share 65% 17.4% 15.4% 2.2% 100% HHI 4225 303 237 5 4772

Post-Merger
Company Gerber Heinz & Beach-Nut Other Market Share 65% 32.8% 2.2% HHI 4225 1075 2

Total

100%

5302

Increase in HHI = 535
6/16/2012 EMT 606 - Heinz -…...

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