Diamond Foods Inc Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

Diamond Foods had become public in the year 2005 and since then the company had experienced significant growth in its sales and its stock price had expanded rapidly over the years. The IPO price of the company was around $ 17.50 per share and by the end of the year 2005; the stock price of the company had reached to $ 55 per share. The management of the company had always focused on expansion of the company’s product offerings and increasing its market share.

Diamond Foods and its brand has become one of the dominant brands in the market and the snacking habits of the company have acquired he forefront in the minds of the consumers. Many future growth opportunities are being considered by the management of the company and recently the company had hired the Pop Secret Company. The core competency of the company lies in the marketing abilities of the company and the food packaging methods (Alpert B, 2011). Over the last few years the management of the company had expanded with significant acquisitions and the key brands of the company comprise of Diamond Culinary Nuts, Pop Secret Popcorn, Emerald Premium Snacks and Kettle brand potato chips. The growth of the company had been truly impressive over the past years.

Current Business Model

The business model of Diamond Foods is basically a vertically integrated business model. The business model of the company had allowed it to exploit all the new opportunities and react quickly to all the trends in the market. The management of the company has maintained stability throughout its operations based on its patented technologies and roasting facilities. The company has taken many steps to curtail the costs and the turnaround strategies of the company has helped the company strongly in reducing the dependency of the company on discount, lowering all the underperforming SKUs and improving the price realization for all the major offerings of the company.

New Acquisitions made (and effects on share price/shareholder value)

Over the years the company had growth by acquiring many significant growth companies and big brands. The first acquisition that had been made by the company was of Harmony Foods and the company had agreed for a deal of $ 18 million to buy the assets of Harmony Foods in 2006. In the first year of the operations of the company the company had achieved net sales of about $ 477 million and the gross margin percentage for the company was 14.3%. This had proved to be one of the values creating acquisition for the company.

Diamond Foods Inc Case Solution

Next year, Diamond Foods went for another acquisition. This times the management of the company though to expand into the broad snack market. As a result of this decision the management of the company purchased the Pop Secret brand from General Mills for a consideration of $ 190 million in cash. After the success of the deal the company was positioned in direct competition with some of the world class players such as the Frito Lay of PepsiCo.

Despite this potential acquisition the size of Diamond Foods was small however; the growth of the stock of the company was significant. In the March of the year 2009, the share price for the company had increased rapidly and was trading at $ 20 per share. This share price was closed at an offering price of about $ 25 per share. This shows that the company had created significant wealth for its shareholders and the future growth prospects of the company also improved when the price to earnings ratio of the company had reached a level of 21 times as compared to the S&P average of 18.6 times. The gross profit margin for the company had increased to around 16.6 percent in 2008 and then in 2009 it had climbed up to 23.7%.

Later in the year 2010, the management of the company had announced that it was further expanding the snack business by acquiring another snack company called Kettle Foods. This was a major potato chip maker and the company had agreed to pay around $ 615 million for its acquisition. Two plants of Kettle Foods were purchased by Diamond Foods, one in UK and one in USA. After the acquisition of a company of such as big size the company was change and the snack sales of the company had outweighed its culinary sales which was its primary business...................

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