How they control cost: 22-July-08
Sourav Mitra -
Wednesday, July 23, 2008 9:34 AM
Barry Callebaut AG, the world's biggest contract manufacturer and supplier of bulk chocolate, fighting a 40 percent jump in cocoa prices:
1. It uses its scale of operations to make products almost 20 percent cheaper than smaller companies
2. It has trimmed consumer businesses over the last year. It has reduced sales of its own brands of chocolate, including Sarotti and Jacques, to 20 percent of revenue from a third in 2005. It sold the Brach's candy line to closely held Farley's & Sathers Candy Co.
3. It has frozen hiring and cut marketing to save 20 million Swiss francs in 2008 and may be extended into next year.
[Click here for full story at Bloomberg.com]
Larger scale of operation = lower costs
Trimming less profitable businesses = lower costs
Cutting hiring and marketing costs = lower costs but sometimes with a negative impact on income
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Big Pharmaceutical Companies, facing fewer prescriptions filled, patent expirations, and FDA rejections of new drugs:
1. They are continuing to consoldate (Roche has bid $44 billion for Genentech, Teva Pharmaceutical Industries has bid $7 billion for rival Barr Pharmaceuticals).
2. They are slashing sales personnel
3. They are implementing efficiency plans
4. They are slashing dividend
[Click here for full story at Businessweek.com]
Aren't back office guys usually the first to go in downsizings?
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Wachovia, the fourth-largest U.S. bank by assets, with $8.9 billion in losses tied to mortgages:
1. It will leave the wholesale mortgage lending business.
2. It will cut 6,350 jobs
3. It cut its quarterly dividend to 5 cents per share from 37.5 cents, which will conserve approximately $700 million of capital per quarter.
[Click here for full story at Businessweek.com]
Leaving unprofitable businesses = cost savings
Job cuts = lower cost but sometimes with some adverse impact on income
Lower dividend = lower cost of financing