The problem with the pricing has been discovered at the quarterly business performance review, in which the management team had reviewed the key results from all markets and product types. The Swedish unit had reported their latest results for 3 main sugar products, and these were their results.

Sweden Q1-2020	Total granulated and powdered sugar
Revenue (Net Sales)	SEK 27,579,000
Gross Margin	SEK 9,856,000
Operating Profit	SEK 1,235,000
OP%	4.5%

NordZucker has a policy of achieving an Operating Profit (OP%) of minimum of 5% on all products sold, so when the new results came in, the new results from Sweden were red flagged for corrective action. Therefore the central sales department was asked to look into this and figure out what was going on and how to change the prices to make sure that the OP% policy was adhered to going forward.

At the management meeting in NordZucker in Germany, the profitability issue with the Swedish operations were discussed since the results showed that the Swedish operation was falling behind budget. Therefore, NordZucker wanted to review the financial situation and potentially re-set the prices for the 3 main variants of their sugar products for the Swedish market:

- Granulated sugar variant 12x1 kg (A)

- Granulated sugar variant 6x2 kg (B)

- Powdered sugar 12x1 kg (C)

The task force had this past week been in contact with various internal departments both in Germany, Denmark, and Sweden to find the relevant data needed for re-pricing the three products. They have been in contact with a variety of departments like accounting, production, local sales managers, the marketing department, and the local management team in Sweden to collect the information needed.

The task force had shared their main findings with Andreas yesterday:

- The total granulated sugar sold in the Swedish market was 1,440.252 tons of sugar with a 60.04%/39.96% split between the 12x1 and 6x2 kg variants.

- Total Sugar sales was 1,629.696 tons

- Existing prices per case for the three variants were SEK 248.33 / SEK 233.60 / SEK 275.86

- The company offered sales discounts to support the sales of products to wholesalers and retailers.

- The trade discounts given were (in % of net sales) for the three variants: 22.7% / 19.76% / 19.74%

- The cost of producing the products were split in prime costs and conversion costs, where prime costs are associated with the acquisition, procurement, and transport of raw materials, and conversion costs relates to the production of the finished sugar (Converting raw sugar to finished product)

- Prime costs for granulated sugar were SEK 11,925,000 and for powdered sugar SEK 1,603,000

- Conversion costs for granulated sugar totaled SEK 3,630,000 but conversion for the 12x1 variant was a bit higher (69.8% of total granulated sugar conversion cost) than for the 6x2 version, because of a slightly different production process. Conversion costs for powdered sugar was SEK 565,000.

- The sales and marketing related expenses were aggregated and included costs for advertising, consumer promotions, and sales cost.

- Total advertising spend on the three variants were SEK 2,069,000. The internal split key for the three variants were 52.9% / 33.9% / 13.2%

- Total promotional spend were SEK 1,207,000 and the split was slightly different as there were more promotion focus on the powdered sugar: 47.1% / 30.2% / 22.7%

- The sales cost for granulated sugar were SEK 3,831,000 and for powdered sugar SEK 142,000

- The other fixed costs were split into Other general and administration costs and international fees. The other G&A cost was SEK 910,000 where granulated sugar accounted for 86,8% of the total G&A cost. The international fees were set per case sold. The per case fees were SEK 3.44 / SEK 3.32 / SEK 3.93 for the three variants

The purpose of the task force meeting which Andreas was now waiting for was to go over the findings from a financial perspective and to figure out what was up and how to correct prices so they could at least hit the operating profit targets set by the company. What prices should NordZucker in Sweden charge per product for the next quarter in order comply with the min. 5% OP target per product? You can assume that the sales volumes and the costs (e.g. investments in marketing/sales) for next quarter are the same as the quarter we have data for.