Case Solution for Evans Food

...

- Stay the Course (I)

Pros

- Large customer accounts stay with Evans Food in some which Company has 40-50% share

Cons

- Company already losing money on its US volume and barely breaking even on remaining sales

- Raise Prices (II)

Pros

- Double digit price increase would help company breakeven and unprecedented industry price increase to reach acceptable margins

Cons

- Risk of losing some large customer accounts as Pork Rinds contribute little to their revenues

- Loss of large customer accounts would force company to reduce capacity and potentially closing its manufacturing plants

- Competitors not showing signs of price increase

- Expand Internationally (III)

Pros

- Global Pellet market of USD 150 million growing annually at 2%

- Better margins for Pork Pellets

- Helps in diversifying and cutting losses

Cons

- Global market of Pork Pellet is half the size of US market of Pork Rinds

- Local competition in these international markets

- Lack of adequate resources required for expansion.

Objectives have been marked from A-D whereas alternatives are named as I-III. A five point scale 1-5 was used to evaluate alternatives on aforesaid objectives with 1 being lowest score and 5 being maximum score.

ObjectivesAlternatives

A

B

C

D

I

2

4

2

1

II

4

3

3

2

III

3

3

1

4

Weighted score for combination of each objective & alternative after assigning weights and consequently cumulative weighted score for an alternative is tabled below:

Weights

0.35

0.3

0.2

0.15

ObjectivesAlternatives

A

B

C

D

Cumulative Score

I

0.7

1.2

0.4

0.15

2.45

II

1.4

0.9

0.6

0.3

3.2

III

1.05

0.9

0.2

0.6

2.75

Conclusion and Recommendation

From previous exercise, it is clear that options II and III have highest scores and thus should be preferred approach to address issues Evans Food is facing. However, we can’t ignore merits of other alternatives as well. There is no clear cut solution and series of strategic steps be taken to counter the problem.

Our recommendations are as follows:

- The Company should lead and reach a consensus among other players for a price rise across the industry. This would help Evans Food shield its customers from poaching by other players. Pork Rinds even though contribute little to major retailer’s volume, but are an important item for generating store traffic. Moreover, it is a nutritional snack item and has been endorsed by media and important people. Thus, price increase across industry would be a win-win situation for all.

- Price increase would help improve profitability of Evans Food and it will have resources to invest in international market expansion for Pork Pellets which will further add to its bottom line.

- With additional resources, the Company can invest in introducing premium brands or customer-ethnicity based brands for popularizing it further and giving it market leadership.

- Evans Food should look to invest in Pig Farming and thus integrating it vertically to its existing business. It will strengthen its supply chain, reduce costs and capturing upstream profits. Alternately, the Company can enter into long term contract with suppliers and thus shield from any price increases of raw materials.

...