ME2027 - Performance & Cost Analysis

1. Seminar presentation ME2027 - Performance & Cost Analysis Rémy Cointreau Pablo Breitenmoser Renaud Gentil Claire Joumard Rija Razafimahatratra 25th November 2007

2. The Company And Its Value Chain Presentation : R&D Design Production Marketing Distribution Customer Service The value-chain analysis: Content Packaging Supply: Bottles, caps, stickers Core Process: Cultivate,Vat, Jam B2C, luxe R. C. Dist. Network Maxxium After Sale services 2/10

3. Cost Allocating and Cost Tracing Cost Objects (Champagne bottle) Direct Costs Cost Tracing Traditional costing system Indirect costs Cost Allocation ABC Because Production activities are direct  1 sort of Champagne produced in one place (Reims in Champagne-Ardennes)

4. Activity-Based-Costing (ABC) 1) 3) 2) • Choice of the activities • Costs of the different activity cost centres • Choice of relevant cost drivers -> calcul of the cost driver rate Total costs per unit output • Apply the cost driver rates to the Champagne 4/10

5. Calcul Of The Break-Event Point • Fixed costs • Use of plants • Use of machines • Sellingprice: 12,7/bottle • Variable cost per bottle: 11,5€ • Fixedcost: 1 300 000€ • Break even point: (12,7-11,5)*x=1 300 000 x=1 083 333 5/10 • Variable costs • Raw materials (bottles, stickers, grappes, etc.)

6. Break-Even Point Costs and revenus 150 000 000 Turnover 120 000 000 Profit: 10 000 000 90 000 000 Total costs 60 000 000 30 000 000 Fixedcosts Number of bottles (in million) 1 083 333 2 4 6 8 10 6/10

7. Relevant Costs and Investment Decisions • Decision: The projects for the champagne division on the Allée du Vignoble site are : • - Construction of new administrative offices • Expansion of the fermenting room • Construction of a bottle turning room. • These follow the disposals in progress of the sites atBoulevard Henry Vasnier and a part of Chemin Vert. • The total cost estimated is • €7 million

9. Cost variance analysis & Decision making • Cost variance analysis • Using cost variance analysis to budget the future and compare forecast with actual outcome. •  Rémy Cointreau works within a established old markets  fight for market share  difficult to predict •  Rémy Cointreau’s luxury alcohol product portfolio is mainly defined by its brand’s  reputation of the brand • Explenation of cost variances: • international markets  variation in exchange rate, taxation and costumer acceptance • Sales volume (costumer preferences)  marketing costs • Marketing in order to promote brand  reputation Decision making Should Rémy Cointreau set up a own distribution network and quit partnership?  Yes, possibility to grow oganically by reducing costs and increaing value chain.

10. Risk Policy • Legal Risks • Regulations differ for every country (Production, packaging, marketing). • Integrated legal department carries out preventive checks on all legal risks. (cost about 5% product revenue) • no contracts with third parties that carry major obiligations for the entire group  cost very predictable Costumer • No operations in unstable regions. • Almost zero exposure to costumer risks  low costs • limitation through one strong network (network as costumer)  Maxxium (Europe), Carrebean (USA) • Competitior • Highly competitive market environment •  Permanent focus on its brand, quality of its product, price and optimizaition of distribution • Industrial & Environmental Risks • Rémy Cointreau’s operations are based on permanent industrial and food safety requirements. • ISO 14001 / HCAAP, Hazard Analysis of Critical Control Point (ISO 22000, roll-out 2007), QSE - Quality, Safety Environment  high brand reputation  consumer awareness  “zero defect“ policy