Volume
What are the three types of volume metrics?
1. Consumer Pull
2. Depletions
3. Shipments
The ________ is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year.
Profit & Loss Statement / Income Statement
The P&L captures all of the operating results from Sales to A&P to Overheads, and is ultimately what drives Diageo's results and the majority of their bonus.
The “top line” of the P&L – i.e. the total proceeds from selling our brands to our customers - refers to what?
Gross Sales Value (GSV)
______ is a key Diageo metric as it measures our ability to generate “top line growth” – in essence, growing ____ is the platform for growth throughout the P&L.
Net Sales Value (NSV)
Sell-Through Value is also known as _____?
Depletion Net Sales Value (dNSV)
The best measure of the sustainability of our shipments is our sell through value (dNSV).
National Alcohol Beverage Control Association (NABCA)
Freight on Board (FOB) refers to what?
Also known as Free on Board, it indicates the point at which the costs and risks of shipped goods shift from the seller to the buyer.
In Diageo language, the price the distributor pays for product. ie. Gross Sales / Case "Shipments"
Which line item on the P&L statement refers to amounts paid to customers and distributors to incentivize them to purchase our products?
Trade Spend: Volume Discounts, Entity Grants, Discounts & Promotions
What are the three growth drivers of Net Sales Value?
1. Volume - Selling more cases
2. Price - Selling at higher cost
3. Mix - Selling to more/different channels (skus, demographics, category, specific customer)
What is the difference between Depletion Net Sales Value (dNSV) and Net Sales Value (NSV)?
NSV is based on shipments and dNSV is based on depletions.
A Standard 9L case of alcohol contains how many servings?
272
Gross Profit / Net Sales Value =
Gross Margin, a key percentage showing the profitability of a company when comparing revenue to the costs involved in production
What type of costs are included in Cost of Goods Sold (COGS)?
DIRECT costs – they can be traced directly to a given product and the more we make the more we use and vice versa ie. liquid and packaging
Volume (+15%) + Price (-10%) + Mix (-20%) = What % NSV growth?
NSV = -15%
Whereas the old Diageo "Points System" was based on margin enhancement through premiumization, the new dNSV system is based on ________ growth.
Market Share
Please list the standard serving size for the below beverages:
Spirit:
Wine:
Beer:
Spirit: 33ml (~1oz)
Wine: 165ml (~5oz)
Beer 330ml (~10oz)
Also known as Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA), this key P&L metric is the best measure of brand profit as it includes ALL direct brand costs (e.g. before allocation of overheads)
Contribution After Advertising & Promotion (CAAP)
This additional area of COGS that is more INDIRECT or FIXED in nature (investments in people or machinery, assets that are capitalized over time) is referred to as what?
Overhead
Driven by price or mix, the difference between NSV growth and Volume growth is known as _____.
Gearing - The measure of value per unit sold. Gearing denotes whether volume growth is translating to NSV growth.
Which size has the higher dNSV?
40cs of 1.75L were sold at $40. It took $100 in promotional discounts to sell the 40cs.
60cs of 750ml were sold at $25. It took $100 in promotional discounts to sell the 60cs.
750ml = $1,400
1.75L = $1,500
1.75L = Highest dNSV
What volume metric is Diageo's Net Sales Value (NSV) and ultimately financial health based on?
Shipments
Also known as Earnings Before Interest & Taxes (EBIT), this key profitability measure can be found by dividing operating profit by net sales value.
Operating Margin measures how much profit a company makes on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax.
In regard to Advertising & Promotion (A&P), what is the difference between Above the Line and Below the Line investments?
Above the Line (ATL) investment includes media spend, outdoor advertising costs, public relations costs.
Below the Line (BTL) investment includes the cost of promotions with customers, trade entertainment.
You sell a case of apples for $2 and a case of oranges for $4.
In year 1, you sell 10 cases of each.
In year 2, you sell 8 cases of apples and 12 cases of oranges.
How many ppts gearing does this equate to and what NSV growth driver is it attributed to?
Year 1: 20 cases = $60 NSV
Year 2: 20 cases = $64 NSV
Gearing = 7ppts / Mix
How do you calculate dNSV?
(Depletion Volume X Freight On Board Rice)
-
Federal Excise Tax
-
Trade Spend
=
dNSV