A. COMPANY INTRODUCTION
1. History and development
Deriving name form a beautiful Tuscan village in the Valtiberina, Aboca S.s. was founded by Valentino Mercati in 1978 and has grown to become the leading herbal company in Italy since then. Aboca S.s manufactures herbs from its organic farms and using both in-house technologies and those developed in collaboration with numerous Italian and foreign universities in order to develop a vertically integrated agro pharmaceutical product line.
Today Aboca capacity can cultivates more than 1700 acres. The farming processes are guaranteed to be organic, seed selection, planting, fertilization, and pest control, harvesting and cleaning. Aboca is the only brand that can achieve the optimum level of active principles (an herbal component that induces the therapeutic effect) in its products whereas over 20 chemists arein charged in its manufacturing and quality control laboratories.
By having its own marketing design department and direct sales force, there attractive product packaging, in-store displays and advertising props make Aboca a favored supplier to pharmacies and herbal shops. Now Aboca is the supplier for over 7000 retailers in Italy.
Moreover, Aboca maintains its quality leadership with an investment of 10% of its revenue into research and development. Such investment has led tomany inventions in new product lines and manufacturing processes of the brand.
Today, like 30 years ago, the focus of Aboca is still on researching and innovation in order to develop products those can able to make use of the properties of complex natural matrices, or respond to health care needs of both homeostatic and pathological, fulfilled with respect for people and the environment, while creating awareness of the present and future advantages of such that approach.
2. Mission and functions
Aboca commits its mission in improving people’s lifestyle with all natural products which is visible in all aspects of Aboca’s business. From there, clear indications for Aboca’s values are its commitment to the organic or “all-natural” concept, and high investment in customer education.This attention to the company values has distinguished Aboca from other herbal supplement manufacturers in Italy and more.
About its commitment to product customer educating, eighty of Aboca’s 200 employees are known to be sales representatives who spend most of their time talking with doctors, pharmacists, herbalists and customers about Aboca’s products with typical instruction includes (when to use, how to use, and why to use the products). From that, Aboca provides training programs for doctors and pharmacists in the use of herbal remedies. And during the year of 2000, Aboca provided in-residence training to over 1000 Italian health care practitioners.
Due to the need of inform clients and consumers of the benefits of herbal remedies and to educate consumers of the strict standards, the adheres in its manufacturing processes, detailed description and analysis mustbe presented. Therefore, print mediais purposely selected as Aboca’s preferred method of advertising.
3. Key products
Nowadays, the Aboca brand in the product line for its pharmacies market and currently comprises 60% of Aboca S.s. revenue and profits.
Other than that, in order to serve both two distinct herbal retail channels in Italy, pharmacies and herbalists, Aboca's has positioned two product lines respectively. The products are positioned to be technologically sophisticated including all natural ingredients. It is the premier product line of Aboca by its herbal formulas which are specially designed to treat defined health ailments. Moreover, Aboca’s herbal products are also designed to treat multiple therapeutic areas such as geriatric, coronary and emotional ailments for a list of therapeutic areas and associated herbal treatment.
Another brand is Planta Medica, in 1992, Aboca acquired the Planta Medica brand from a competitor and its quality has been re-customized to be compatible with the Aboca product lines.The Planta Medica product line (approximately 200 skus) is positioned to serve the herbalist retail channel. This product line emphasizes the traditional qualities of herbal remedies that are compatible with the herbalist concept of treatment. However, the herbal products are remarkably similar to the Aboca brand except includingpreservatives and chemical additives, which are absent in the Aboca brand line. At the acquisition, it was then decided to sell this brand only to herbalists to avoid confusing pharmacy consumers loyal to the Aboca brand name.The Planta Medica products are supplied for 30 sales agents who manage 2000 herbalist retailers. The price policies and promotions are consistent with Aboca brand policies. At the end, Planta Medica contributes 40% of Aboca S.s. revenue.
4. Organizational structure
In the rapid growth from the days when Valentino Mercati sold homemade herbal remedies to friends, his firm has struggled to build an administration structure to serve its expansion. Valentino recently chose a three level management structure.
 The first level of management is responsible for the long term strategy and today comprises Valentino as president and chief executive officer who consults with his board of directors in deciding corporate strategy.
 The second level of management is division managers who are responsible for the operational functions.
 And the third level is the product and technical support managers. The organization structure was recently developed with the help of a consultant in order to define responsibilities and provide a succession path for executive development, and to inspire departmental leadership.
In 2000, all international operations were changed into centrally controlled. For instance, Aboca’s sales to China, Japan and Spain were made through independent sales representatives and wholesalers with negotiated term of sale by Aboca's corporate sales office.
5. Business performance
Aboca decided to finances most of its operations internally. This financing behavior has both advantages and disadvantages. Using its own revenues to support internal renovate creates a very conservative atmosphere.
In Italy, the cost of capital is much higher than in America (30% compared to 15% typically) so it is motivated to internal financing in order to avoid the high interest payments. Cash must be saved until it reaches a level equal to or higher than the cost of investment. Typically, Aboca has large quantities of cash on hand and very little debt so the risk of bankruptcy is minimal. However, the downside of such financing behavior is the constraint on growth so that Aboca must wait until they generate enough cash to make another investment.
In 2000 its gross profit margin from production was 61% and net profit after taxes and interest was 5.5%. For the first 9 months of 2001, Aboca has shown its remarkable sales performance and expects to achieve revenue growth of over 25% in 2001 as revenues should exceed $62 million for the year. And Aboca’s revenue has been matched by exceptional profitability.