Essay About Largest Producer Of Pork Rinds And Pork Skin

Case Solution for Evans Food
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Case Analysis of Evans FoodTable of ContentsExecutive Summary        3Problem Definition        3Objectives        3Situational Analysis        3Strategic Alternatives        6Evaluation of Alternatives        6Conclusion & Recommendations        7Executive SummaryEvans Food is $100 million Company based out of USA & is largest producer of pork rinds – salty snacks made out of pork skin – in world and sold at some of largest US retailers such as HEB, Meijer, ALDI and Wal-Mart. Pork Rinds contributed to 60% of company’s revenue while remaining 40% was contributed by Pork Pellets which was mostly sold in non US markets. In 3 years, cost of pork skin had increased significantly but company’s selling price to its customers had not kept pace with increase in raw material costs. As a result, Evans Food started losing money on a significant portion of its US volume and barely breaking even on remaining sales. Margins on Pork Pellet Sales were better as compared to Pork Rinds. The Company is now deliberating among three options – Stay the Course or Raise Prices or International Expansion – they can pursue in order to reverse the trend. Accordingly, we would look these options and evaluate them on marketing objectives important for Evans Food & derive a logical conclusion Problem DefinitionEvans Food is confronted with a precarious situation where because of significant rise of Pork Skin prices, its margins are getting diluted and it has come to a situation where it has to take important decisions.Marketing ObjectivesTo achieve and maintain net margin of 5% for overall business in next 3 years (A)To retain our profitable customers (B)To reduce costs (C)To increase our market share in non US markets in Pork Pellets to 35% by 2016 (D)Situational AnalysisGross margin on pork rinds was in single digits. Pork Skin prices started increasing sharply in early 2010, because of following reasons:Demand for alternative protein (compared to chicken or beef) increased in markets such as Mexico and China.Supply of pork skin was adversely affected by a pig virus that killed millions of piglets.B the 3rd quarter of 2013, Evans Food was beginning to lose money on its US volume and was running low on cash. The Company has to let go some of its non profitable customers which collectively accounted for USD 8 million in revenues.Revenue break up of Evans Food, product wise are as followsProductPork RindPork PelletMarkets ServedUSNon USRevenue (USD)6040Total Market Size (USD)320150Market Share (%)18.75%26.67%SWOT Analysis of Evans FoodStrengthsWorld’s largest producer of Pork Rinds Astute managementBig retailers as its customersWeaknessesNot enough time and resources for international expansionOpportunitiesExpansion in non US marketsOnly 18.75% market share in US Pork Rinds marketThreatsHigh bargaining power of customersCompetitor showing no signs of price increaseLosing money because of high input costAs mentioned, market of Pork Rind is growing yearly at rate of 1%-2% whereas market of Pork Pellet is growing yearly at 2%. If we plot considering this growth rate & existing market, we find that Pork Pellet market is not growing rapidly. 2014201520162017201820192020Pork Rind Market (1%)320323326330333336340Pork Rind Market (2%)320326333340346353360Pork Pellet Market (2%)150153156159162166169Porter’s 5 Forces Analysis of Pork Rinds IndustryPorter’s Five Forces Analysis for Pork Rinds IndustryThreat of New Entrants is LOW Commodity and low margins industryInitial Investments highStrict regulation by US Department of Agriculture (USDA) for Pork Rinds producersHigh entry & exit barriersThreat of Substitutes is LOWPopular snack item Some Pork Rinds brand commanded premiumHealthy junk foodPropensity to switch is lowBargaining power of Suppliers is MEDIUM Major raw material is Pig SkinHigh Pork Skin pricesBargaining power of Buyers is HIGHBuyers are big retailers such as Wal-Mart, etc as well as club ,convenience & discount storesA salty snack category for retailers but contributed little to overall revenue to big retailersMost retailers have their own private brandsMajor revenues from big retailers, hence they enjoy a high bargaining power Industry Rivalry is HIGHCommodity product, very little to differentiateHighly competitiveWhy Pork Rinds important for Evans Food customersNutritional snack food and highly popular Endorsed by Magazines, leadersGenerated store trafficStrategic AlternativesStay the Course (I)Raise Prices (II)Expand Internationally (III)Evaluation of AlternativesWe individually look at pros & cons of each of strategic alternatives available with Evans Food