Analyzing Operations & Finance: Accolade Wines Holdings & Carlsberg

This report conducts a comparative financial analysis of Accolade Wines Holdings Europe Ltd and Carlsberg UK Ltd, examining their operational context within the alcoholic beverage industry. It includes an industry analysis, company overviews, and an assessment of business strategies. The evaluation encompasses financial performance (gross profit margin, net profit margin, operating return on equity, and return on capital employed), risk analysis (quick ratio and debt-equity ratio), managerial performance (asset turnover and inventory turnover), and market performance. The analysis utilizes financial ratios calculated from company annual reports to benchmark performance against industry standards and competitors, considering general market movements and providing a comprehensive overview of their financial health and operational efficiency. The report includes appendices with detailed data and calculations.

Running head: MANAGING OPERATIONS AND FINANCE
Managing Operation and Finance
Name of the Student
Name of the University
Authors Note
Course ID

1MANAGING OPERATION AND FINANCE
Table of Contents
Chapter 1 Operational Analysis.................................................................................................2
Introduction:...............................................................................................................................2
Industry Analysis:......................................................................................................................2
Company Overview:..................................................................................................................6
Business strategy:.......................................................................................................................7
Operational Analysis:.................................................................................................................7
Chapter 2: Evaluation of Performance:......................................................................................8
Financial Performance:..............................................................................................................8
Risk Analysis:..........................................................................................................................12
Managerial Performance:.........................................................................................................14
Market Performance.................................................................................................................18
Market Movements:.................................................................................................................19
Conclusion:..............................................................................................................................19
Reference list:...........................................................................................................................20
Appendix: 1: Financial Performance and Data Calculations:..................................................22
Appendix 2: Risk Analysis and Data Calculations:.................................................................23
Appendix 3: Managerial Performance and Data Calculations.................................................25
Appendix 4: Market Performance and Data Calculations:......................................................27

2MANAGING OPERATION AND FINANCE
Chapter 1 Operational Analysis
Introduction:
The report will gauge into the financial performance of Accolade Wines Holdings
Europe Ltd and Carlsberg UK Ltd. Accolade Wines is regarded as the top rated wine
company in UK with the volume and it is regarded as the fifth major wine producing business
in the world. Carlsberg UK Limited is the active company that is incorporated during 28th
August in 1903 with the registered office located in the Northamptonshire.
A comparative ratio analysis will be conducted along with the UK registered wine
producing companies to further understand the operational analysis of the firm. The area of
analysis would include providing an operational insight and performance by using the data
from the obtained from the annual reports and share price analysis would also be conducted
in the current study.
Industry Analysis:
According to the reports by Market line, the European consumption of the alcoholic
drinks is regarded as one of the largest in the world that accounts for 43% of the global
consumption during 2015 (Messner 2016). In spite of this, the volume and sales and patter of
consumption of the alcoholic drinks in that regions have are impacted by the increasing
health and wellness trends with movement in the direction of higher quality products.
The health and awareness trend in the Western Europe is shaping up the influence of
alcoholic drinks sector (Mas et al. 2016). Consequently, there is reduction in consumer’s
alcohol intake and drinking alcoholic drinks at the moderate rate. On the negative side the
consumers are being diverted towards the alternative substitutes such as non-alcoholic drinks
and alcohol free lager.

3MANAGING OPERATION AND FINANCE
A movement in the direction of premium products, particularly the alcoholic products
of high quality with lower content of alcohol are predicted to grow. The alcoholic drink
producers in the European region are shifting their development towards premium brand
image and premium packaging since the customers are keen to pay for a higher quality and
strong brand name (Callahan, Stetz and Brooks 2015). The alcoholic drinks market in the
region is largely controlled by the preference of customers because of this, leading brand
players are making their investment in increased marketing campaigns to promote their
products and attract consumers.
Brand loyalty is regarded as the vital consumer preference in the direction of some
brand influences such as new product launches and product positioning (Delmas, and Grant
2014). This provides a greater opportunity for the niche alcoholic drinks with rise in demand
and if marketing is based on the quality and diversity then they can be sold at the higher rate
and appeal to the Western European consumer’s requirement for healthier and premium
quality alcoholic beverages.
The Western Europe drink market for alcoholic products is estimated to be around US
$95.1 billion worth in respect of retail sales in 2015 with 12% fall from the preceding year.
The review report obtained during 2015 represented a negative decline in the compound
yearly growth rate of 2.3% (Galati et al. 2015). The market trend is regarded true in terms of
total volume sales of alcoholic drinks whereas the reviewed historical data reflected that total
sales volume stood 39,200 million litres (Agr.gc.ca 2018). Among the top nations in respect
of retails sales and total volume of sales UK is estimated to be around $25.3 billion with
5771.8 million litres.

4MANAGING OPERATION AND FINANCE
Figure 1: Historical retail value sales of Alcoholic drinks in Western Europe in US$
million
(Source: Agr.gc.ca 2018)
Figure 2: Figure representing top ten Alcoholic Sales in Million Litres
(Source: Agr.gc.ca 2018)

5MANAGING OPERATION AND FINANCE
Figure 3: Top Ten Wine Companies
(Source: Agr.gc.ca 2018)
The value of the fine wine has increased by 20 pc over the last few years as the
demand is rising with investors are looking for the new ways of diversifying their portfolios.
UK alcohol production reached an all-time high of 6.3 million bottles in 2014 with a rise of
42 per cent at the back of favourable weather. Researchers have witnessed a rise in 3% gains
in the developed market and 5% fall in the emerging market (Chong 2014). Considering the
underlying net sales to the growth of 3% to 4% for the entire year across its portfolio results
in increase in operating income of 5% to 7%. While it is noticed that Constellation Brands
generates more than half of the consolidated revenue from the sale of beer that has bought
more than $3.3 billion during the first nine months of operation (Golicic, Flint and Signori
2016). This is almost equivalent to robust wine and spirits portfolio that have generated $2.4
billion in terms of sales revenue.

6MANAGING OPERATION AND FINANCE
Figure 4: Figure representing UK Wine Stock Market
(Source: Agr.gc.ca 2018)
Company Overview:
The Accolade Wines Holding Europe Ltd is regarded as the world’s top wine
producing company in UK in terms of volume and it is considered as the fifth largest wine
company in world (Accolade-wines.com 2018). Drawing from the proud history with first
wineries established in Australia and since then the company has changed into the world-
wide wine corporation by making world’s some of the well-known products. Brands under
the UK tags comprise Echo Falls which is the world’s third major wine product and Stowells
being the top wine brand on the premises trade.
On the other hand, as the part of the UK group Carlsberg UK have over the years been
brewing and selling some of the Britain’s favourite bears (Carlsberg UK 2018). Presently
they include Carlsberg, Carlsberg Export and Tuborg. The company was founded during the
year 1847 and it is based in Northampton United Kingdom. Carlsberg UK limited functions
as the subsidiary of A/S.

7MANAGING OPERATION AND FINANCE
Business strategy:
Accolade Wines business models comprises of two “state of art” manufacturing,
packing and delivery services that is situated in Bristol, UK, Berri and Australia (Accolade-
wines.com 2018). The company has six lines of packaging with the ability of making 1200
wine bottles in each minute. The Accolade Park can pack all type of bottles ranging from
glass to container.
The business model of Carlsberg comprises of global sourcing of materials (Carlsberg
UK 2018). The brewing and Bottling for a large part ensures the optimal capacity use and
process that are in line with central supply chain.
Operational Analysis:
Accolades Wines Holdings Europe Ltd identifies that the core to being positive
alcohol company in the demanding and changing business environment is to enable business
innovation to match with the deals of the consumer’s requirements (Mozell and Thach 2014).
During the year company the company has devoted around $20 million on improving the
winemaking, packing and delivery processes in United Kingdom.

8MANAGING OPERATION AND FINANCE
Figure 5: Figure Representing Operations of Accolades Wines Holdings Europe Ltd
(Source: Accolade-wines.com 2018)
Chapter 2: Evaluation of Performance:
Financial Performance:
Gross Profit:
Gross profit margin can be defined as the financial metric that is used to determine the
organizations financial health and business (Scott 2015).
 The gross margin for Accolade Wines Holdings during the year 2013 stood 8.88
representing a strong rising trend in the later years as the gross profit margin for the
company in 2016 stood astonishingly 24.29.
 The gross profit margin for Carlsberg UK Ltd is stood strong over the years as in
2014 the company reported gross profit margin of 33.26 which stood strong in 2016
to 35.70.

9MANAGING OPERATION AND FINANCE
 The gross profit margin for both company can be considered favourable with respect
to industry standard of 25%.
2013 2014 2015 2016
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Gross Profit Margin
Figure 6: Gross Profit Margin
(Source: As Created by Author)
Net profit Margin:
According to Schaltegger and Burritt (2017) Net profit margin represents the left over
revenue following the deductions of all the expenses from sales.

10MANAGING OPERATION AND FINANCE
2013 2014 2015 2016
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
Net Profit Margin
Figure 7: Net Profit Margin
(Source: As Created by Author)
 Accolade Wines Holdings posted a net profit margin of 3.92 during 2013 which
subsequently increased to 5.27 in 2014. The net profit margin for the company grew
stronger in 2016 as the profit margin stood 30.46.
 The net profit margin for Carlsberg in 2013 stood 1.14 which subsequently fell
negatively to -5.62 in 2014. The ratio gain strength in 2015 to stand 3.29 which again
fell negatively to -2.27.
Operating Return on Equity:
As stated by Warren and Jones (2018) operating return on equity signifies the amount
of net income derived from the shareholder’s equity ().

11MANAGING OPERATION AND FINANCE
2013 2014 2015 2016
-500
-400
-300
-200
-100
0
100
200
Operation returns on equity
Percentage
Figure 8: Operating Return on Equity
(Source: As Created by Author)
 The operating return on equity for Accolade Wines Holdings Europe Ltd remained
stable in 2013 and 2014 with the ratio standing 100. While in 2015 it fell to 59 and
stood 101 in 2016.
 The Carlsberg UK Ltd operating return on equity has represented a tumultuous trend
with the ratio standing 19 and -10 in 2016.
Return on Capital Employed:
According to Robson, Young and Power (2017) the return on capital employed is
referred as the fiscal ratio which determines the effectiveness of the company and efficiency
through which the capital employed.