Laurentian Bakeries Case Study

Cases in Financial Management

Case Synopsis
Founded in 1984 Laurentian Bakeries Inc. operates in the industry of manufacturing a vast variety of frozen baked products within their three operating plants in Montreal, Winnipeg and Toronto. The operating plants produce items such as frozen pizza in Winnipeg, MB, pies in Montreal, QC and Cakes in Toronto, ON- with each representing 30%, 30% and 40% of the total revenue stream respectively. The buyers for this company include large institutional clients such domino’s pizza, etc. which have a significantly higher level of power whereas the seller of the products consists of several food producers which have a relatively low level of power. With the cost of setting up a plant of this scale being high, substitute products will also remain high in the market causing the overall profit margin to be low. With the company’s ongoing effort for continuous improvement Danielle Knowles (VP of operations) proposed to expand one of the operating plants in Winnipeg-which was based on the opportunity if the company expanded into the U.S. market.

Statement
The statement of the problem is how Danielle Knowles will prepare a capital project expenditure proposal to expand the company’s frozen pizza plant in Winnipeg; which is consistent and in line with the company’s capital allocation policy. The proposal should also satisfy the company’s continuous effort for improvement, identification of lost opportunities, satisfaction of HR and environmental impacts and provide sufficient ROI. Situational Analysis The strengths of the company are clearly visible through the company’s effective operations and reputable image in the industry. Being one of the top five in the industry, Laurentian Bakeries has established themselves as a dominant player in the market; however, with a shortage