Bottling the synergy from a beverage plant merger

How we helped

• Consumer Products
• Mergers & Acquisitions 
• Supply-Chain Management & Operations
• Data Analytics 

On the table for a beverage co-packer: the merging of its bottling plant networks with a branded beverage company. The merger could potentially increase the scale of operations and optimize total landed costs to serve for both companies. So: was it a win-win?

The two companies brought in AlixPartners to develop a future-state footprint strategy, based on a proposed merger where the co-packer would fold five manufacturing plants from the branded beverage into their existing network. The return on investment needed to be clearer, along with a roadmap for recognizing the synergies. Which plants would be needed to meet demand? Where could the companies find significant cost reductions? The parties needed detailed answers to those questions.

A team consisting of both the beverage companies and AlixPartners set out to solve the challenge inside eight weeks. The effort began by constructing a baseline, detailing cost items from both companies and harmonizing their different treatment of items. We then tailored the model to identify the best-serving plants for each demand point based on the lowest variable cost-to-serve, including conversion, warehouse, and blow-molding cost impacts. These findings were stress-tested under multiple scenarios, with one built out to test additional constraints and considerations. 

The optimization model provided a summary of plant-to-plant volume movements, associated savings, and future capacity utilization at each plant. Model savings were broken down into multiple initiatives, each with associated cost to achieve and pay-back period. The recommended star initiatives had a run-rate benefit of approximately $30 million, $22 million in variable cost savings and $8 million in fixed cost savings—a 6% improvement over the baseline. The news, in other words, was great. That left implementation.

From the detailed modeling, we developed a high-level roadmap for key initiatives and determined the ramp-up schedule of net cash impact. The initiatives had an associated one-time cost of $62 million and were estimated to take just over two years to complete.

The future-state footprint placed more customer demands closer to production sites, reducing freight costs and transit time. The cost-to-achieve calculations included additional lines, blow molding, additional bottle size and packaging capabilities at key receiving plants to make plants compatible with volume belonging to both companies. We also infused seasonality and future growth objectives into the scenario analysis.