Foods Business

Mary Alice McKenzie is facing numerous issues in growing her Vermont-based fresh-prepared foods business. She must address immediate operational problems-such as bottlenecks and capital equipment decisions-as well as decide on a long-term strategic position. This case investigates how she can structure her operations today to take advantage of the continued growth in the home meal replacement market.

The present status of business generated at Fresh Connections is 50% from the retailers, 25% from the restaurants, and 25% from co-pack companies. However, from 1985 to 1995, the food market showed an 80% growth in the area of restaurant business and only 11% in the area of grocery stores. Restaurant business is a growing industry and opens a lot of door for new clients and growth for a company like Fresh connections. Based on this, the target market for Fresh Connections should be redirected from retailers to restaurants. The smart distribution that will be more profitable is up to 50% of business focus on the restaurant business, up to 30% on the co-pack business, and 20% or less on the retailers. This new business distribution will increase contribution margin and sales revenue for the company. Revamping the focus of the business will also make the company more innovate in research, development, and employee training, therefore making them more solid in their field of business.

Retailers have the thinnest margin out of all three business areas. While not bringing in a lot of marginal dollar to the company, they also tend to increase sunk cost due to their lack of knowledge in the R&D process, and their lack of knowledge in managing the fresh foods that are brought to their shelves. This market area poses as a huge risk to Fresh Connections because retailers are only worried about cheap prices and quick deliveries on their orders, while wanting to maintain the quality. It make it difficult for Fresh Connections to make that much marginal profit in this area because while dedicating the labor cost and quality cost in providing good products for retailers, they are losing money on the delivery cost and the retail friendly low prices they have to let their products sell for. With the lack of shelf life management in the retail stores, there is not a maximization of the product life and it poses as bad publicity for the Fresh Connections because food spoiling...