Sustainability through investment
A McCain Foods case study

Page 1: Introduction

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McCain Foods is the world's largest producer of frozen chips. It opened its first processing factory in New Brunswick, Canada in 1957 turning out cartons of frozen french fries. Owned and managed by the McCain family, the company grew rapidly and entered the UK market in the 1960s. Today, around 45% of all frozen potatoes sold in the UK are McCain frozen potato products. This makes McCain Foods...
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Page 2: Reasons for investment

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McCain Foods wants to find ways to maintain competitiveness by reducing costs. It also wants to establish a more sustainable source for the energy it must use. The sales revenue left over after paying costs is profit. There are two common measures of profit. Gross profit is the difference between sales revenue and the direct costs of production. At McCain these include costs of labour...
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Page 3: Investment appraisal

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A business needs to assess if an investment is worth doing - will it recover its costs, will it make savings, will it provide a profit on the original investment? There are several methods of analysing an investment. Payback The simplest test to understand if an investment will pay for itself is to calculate its payback period. This is the time it will take for the original investment to pay...
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Page 4: Discounted cash flow

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A business must consider whether the value of investing in a particular project will be greater than the value it might lose from not investing in other projects. This is known as opportunity cost. Discounted cash flow helps a business consider what the value of money likely to be received in the future is worth today. It takes into account the effect of time on an investment. It also shows how...
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Page 5: Investment for sustainability

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Sustainable business needs a long term plan. There are a number of pressures that businesses need to respond to from: customers government stakeholders including shareholders environmental pressure groups, such as Friends of the Earth. McCain also looks for ways to reduce its costs without compromising on quality for customers.  As market leader, McCain Foods can influence...
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Page 6: Conclusion

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A business needs to ensure that it will get a good return on investments. Ensuring profitability is the basic goal of every business. However, rather than simply switching energy providers to cut costs, McCain looked for a more sustainable solution. McCain invested in the wind turbines and lagoon to save energy costs. By calculating the set-up and maintenance costs against its current...
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