Azalea Seafood Gumbo Shoppe Group Paper
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Azalea Seafood Gumbo Shoppe Group paper, 5 page limit
What is competition like in the value added seafood industry? What competitive forces seem to have the greatest effect on industry attractiveness from the standpoint of packaged seafood producers?
The competitive environment in the value added seafood industry, while not significantly threatening, does still have its challenges. Addison and Rathle acknowledge that there is not a large competitive market for their specific area, although there are four or five that market gumbo. They acknowledgee that their largest competitors are all the other food items in the store that can be purchased. This also relates to marketing competition as Azalea used a food broker and administrative staff to monitor product delivery and store marketing exposure. Finally, there are corporations that have larger, state of the art facilities which prevent Azalea from expanding into larger demand markets. Michael Porter, a Harvard professor developed a model to assess key components of the competitive environment. First are the competitors. While currently not faced with stiff competition from peer competitors, Azalea’s largest competitors may be the ones yet to arrive as Azalea is based mainly on its gumbo. It is vulnerable to a competitor that may enter the market who have a broader range of products to offer or a better tasting product. More aggressive companies with more aggressive marketing campaigns stand to threaten Azalea’s exposure. Also, while not threatening the niche that Azalea has carved out, large companies with state of the art, USDA approved processes create a “glass ceiling” that Azalea can not break through without expansion or creative marketing. The next element is threat of entry. Azalea appears to have a very loyal base of customers both in the large markets and the smaller individual vendor community. However, the industry could expand at any time and with many unfilled areas of seafood product offering, Azalea could become vulnerable. In regards to the third element, Azalea once again has few competitors in the specific gumbo market and their marketing plan appears to be successful. However, customer preference is fickle and can change based on price, packaging and marketing scheme. Also, as Azalea feared before, there are many competitors (i.e. chicken, steak or fish) that customers can switch to. Lower priced substitutes can become more attractive as the economy rises and falls. The fourth element is suppliers. This is attractive for Azalea as there were many vendors to obtain the necessary ingredients for gumbo production. Also, vendors from California to the Gulf Coast are plentiful. Conversely, small value added producers, like Azalea, do not have the purchasing power to negotiate directly with the producer of the ingredients but can select from a variety of wholesalers to get the best combination of price and quality. Lastly is the element of customers. Customers are apparently loyal, but have considerable leverage to affect price as they have the option to purchase other products. Customers exercise additional leverage as they can switch product manufacturers. Also, customer base can shrink if a market (i.e. Winn-Dixie) goes bankrupt and therefore no longer become a venue to market your product.
How is the packaged foods industry changing? What are the underlying drivers of change and how might those driving forces individually and collectively change competition in the industry?
The seafood industry changed beginning in the 1990s and into early 2000s with the acquisition of smaller companies by larger global food companies as they looked to fill gaps in their product offering and to expand their global reach. These large food companies then leveraged food brokers to execute additional activities on their behalf resulting in the marginalization of the small food company. The competition in the grocery market intensified as supermarkets and grocers consolidated making mega centers. This resulted in greater competition for the value added markets as now there were fewer markets. Also, this increased competition among grocers resulted in some going out of business resulting in loss of sales for those vendors. Also, these large grocery chains demands exceeded the ability for small food companies to provide products in such large volume. This forced these small businesses to focus more on smaller markets and also to identify niches in the market that could be exploited. Small restaurants and food chains now became major purchasers of these products. Also, the frequency of the average American eating out increased further adding to the attractiveness of vendor sales to restaurateurs. Also, certain businesses expanded to meet these large demand markets in the grocery and restaurant market. These state of the art production facilities threatened smaller companies without a competitive product or established