Bella's Company Memo by I-Think

From: CEO@bellasicecream.com To: Consulting@rotman.utoronto.ca Subject: Summary of Conversation and Agenda Items Dear Consulting Team, We are excited to be working with you to help guide the future of our business. Bella’s is at a critical point in its growth. Bella’s Ice Cream is not your typical ice cream company. Everything – from how our products are made, to how our policies work, to how our factories are built – is more than a little bit different. Isabelle Matthew, Bella’s founder, had set out to create a company that was good for the world. In business classes at university, Bella learned that profits had traditionally come before the environment, before worker’s rights, before anything else. As a result, many companies paid low wages and paid little attention to the environmental impacts of their work, so that they could make as much money as possible. There are some good arguments for this approach. After all, if you don’t make any money because your supply and production costs are too high, you’ll go out of business. Bella wanted to create a different company, so she made different choices. She wanted to create a Canadian company that would also source its ingredients entirely from organic or fair trade producers. She wanted to hire local employees who would stay for the long term, so she offered generous wages and workplace benefits. Finally, she wanted to make ice cream that was truly delicious. No surprise, then, that Bella’s Ice Cream is expensive to make and is one of most expensive brands in the supermarket. For many years, this way of doing business worked well for us. While we’ve never had the huge market share of a company like Nestle or Hershey’s Breyers brand, we’ve done quite well with a strong local market of loyal customers who were willing to pay more to enjoy the care and quality we put into our products. Recently, however, things have been changing for Bella’s. Our customer base is shrinking because people are worried about the economic climate. Environmental and ethical factors seem to be taking a backseat to old‐ fashioned penny pinching. As a result, Bella’s is losing money. Our Challenge Our company keeps going back‐and‐forth between finding ways to cut all our costs down so that we can stay afloat or keep doing what we’re doing. Our challenge is: do we keep doing what we’re doing and risk going under or do we shift to a more mainstream ice cream company and continue to stay in business? Agenda for our Meeting Objective: Share how our company thinks about this challenge while providing enough information for you to help us. 1. Our Chief Executive Officer will discuss why this is a challenge for our company 2. Our Chief Financial Officer will explain the financials of the business 3. Our Director of Marketing will provide some customer and employee insights We look forward to working with you, The team at Bella’s Ice Cream Bella’s Ice Cream Chief Executive Officer Bella’s Ice Cream (416) 555‐8976 CEO@bellasicecream.com © 2016 I‐Think Initiative, Rotman School of Management

From the Office of the Chief Financial Officer

Bella’s Ice Cream The money side of a business really encompasses two parts. The first part is understanding our revenues‐ which means how much money we make through sales. This includes understanding what price to charge, what factors cause people to spend more or less money on a product, and how to increase the price year by year. The other side is tracking our costs ‐ how much we are spending‐ which is about understanding the cost of our raw materials, labour costs, marketing costs, and everything else we spend to get our product into the hands of our customers. Whatever money is left from our revenues after paying our bills is our profit. And the bigger our profit, the more money we have to grow the company. For a long time, Bella’s was financially healthy. The company sold enough ice‐cream to cover its costs, and we had a big enough profit that we could invest in new, useful projects. However, I’m sorry to say that we are now in serious trouble. I think many in this company might not want to face this head‐on, but it’s my job to look at the numbers so here are a few examples: It costs us $5 to make one pint of ice cream, and we sell it $7. It costs our competition $2 to make the same size ice cream, and they sell it for $5. So, while we make $2 in profit for each pint we sell, they make $3. Not only do they make more per ice cream that they sell, but they also sell more because their ice cream costs less. We are making a profit of just under $1 million per year. Yet, I looked back at our last 10 years, and we range between $500,00 to $1.5million in unexpected costs each year: everything from increase in prices of supplies to benefits used by our employees. Our average is $875,000 in unexpected costs. Our profit is not enough to ensure that we can survive every year. This company matters to so many people; I want to see it live into the future.

From the Office of the Marketing Director

Bella’s Ice Cream Working with our marketing department, we have put a lot of measures in place to learn more about our customers and why they buy our products. We also learn a lot about our employees, what they like and don’t like about working here. From both our employees and customers we look for ways to be better. Our employees and customers value that we are a Canadian company with Canadian roots. While this is a summary, there are key patterns we have found with our employees:  Our company has a retention rate of 80% past five years. That means that 80% of the staff we hire stay with us longer than 5 years, 50% stay past 10 years. For our competitors, their 5 year retention rate is 55% and 10 year rate is 15%. This is important because it saves us money not having to retrain and rehire people.  When we ask our employees what keeps them working at Bella’s they point to the following things: 1. That we pay them more than minimum wage, which allows them to save and be financially secure 2. The on‐site free daycare 3. Benefits for them and their family 4. The welcoming and fun work environment With our customers:  95% of our customers say that they value our ethical practices  85% of our customers say they value our organic ingredients  100% of our customers say they love our taste Lastly, because of our work with our suppliers around the world, we have: 1. Spent over $10 million buying materials from small communities in Bolivia. They have used that money to build a school, a health clinic and bring electricity to their community. 2. The Ontario berries that we use got the attention of several grocery chains in Canada, and that increased the sales of those farms by $20 million every year. Ultimately what makes Bella’s is our people. And when we talk about cutting costs, we are talking about harming the people who make up the Bella’s community. The information in our department tells us that if we make those cuts, we just won’t be Bella’s anymore.