In any mature market, there are both growing and stagnant companies. Some increase sales and operational efficiency, while others are content with maintaining revenues and profits. However, amidst shifts in consumer behavior, rising capital costs, and inflationary pressures, passive stance on strategic issues becomes especially dangerous: it directly impacts company's ability to maintain or create shareholder value.
This context makes it interesting to compare two players in the Russian dairy market.
Both companies produce dairy products, are located in different regions of the Central Federal District near Moscow, offer identical product lines, and had comparable business sizes as of 2020. They are selected due to the similarity of their businesses and market context - thus, the divergence in their development paths post-2020 is largely due to differing strategic approaches of their shareholders.
This suggests an effective scaling strategy and a clear focus on operational efficiency by owners and top management.
This financial trajectory indicates either a lack of growth strategy or its poor execution by top management.
Such metrics reflect Company A’s ability to manage invested capital efficiently and consistently increase its shareholder value.
Such a dynamic between ROIC and WACC indicates that Company B is destroying shareholder value, with negative returns for its owners.
In 2020–2021,
This case illustrates a missed opportunity: owners could have exited at peak valuation, but they did not pull the trigger.
Businesses should ideally be sold at peak profitability, when valuation multiples yield maximum value. Without growth, worsening efficiency and apparent profitability decline owners see company valuations plummeting.
This is the result of a systematic strategic effort that led to EBITDA growth and improved capital profitability.
The decline in ROIC relative to WACC, driven by lack of strategic growth, resulted in value destruction.
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