Hansson Private Label

657 Words Feb 7th, 2011 3 Pages
The industry within which Hansson Private Label exists is a very competitive and volatile one. It is dominated by two types of firms, namely, Branded and Private Labels. Tucker Hansson operates as a private label firm. Private Label firms are an emerging market which is competitive based on its ability to have a lower price than its rivals. This market has experienced growth primarily because of this affordability. However this growth would be regarded as organic.
Based on analysis of the financials, HPL is an excellent business and shows maintainable and sustained growth. There has been growth in the areas of revenue, current assets, owner’s equity, sales and net working capital. As shown in Exhibit 4, sales across HPL retail
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The retailers are motivated to promote private label goods because of their lower costs and greater profit margins.
2. During the 3-year period the retailer will also help create consumer demand for Hansson’s products which will continue after the contract period ends.
3. The expansion will provide opportunities for growth in other market segments
Financial risks include the short payback period. A 3-year payback period would not allow Hansson the opportunity to breakeven. With a negative NPV in the first 3 years Hansson’s decision to invest in the project would be based on his ability to negotiate a longer contract time. The Net Present Value (NPV) would have to be examined in tandem with the other non-financial variables.
A growth rate of 2% in price is not unreasonable as the price to consumers had grown by 1.7% annually between 2003 and 2007. This growth still provides them with ample profit margins. In addition income is expected to increase by approximately 8%.
If Hanson does not decide to invest the $170million, he could consider selling the company. This was based on Hansson being a serial entrepreneur whose modus operandi was to buy manufacturing businesses and sell them for a profit after he had improved their efficiencies and grew their sales. This would have been a good time for Hansson to sell. Alternatively, if Hansson does not accept the investment he could continue to grow at a

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