By LORA KOLODNY Published: November 18, 2009, The New York Times at http://www.n
ID: 362511 • Letter: B
Question
By LORA KOLODNY
Published: November 18, 2009, The New York Times at http://www.nytimes.com/2009/11/19/business/smallbusiness/19casestudy.html
The Company: Crispy Green of Fairfield, N.J., is a maker of freeze-dried fruit snacks sold in silver packages that had seven employees and revenue of $2.2 million in 2008. The snacks are a gluten-, dairy- and nut-free alternative to chips.
The Challenge: To increase sales aggressively. Crispy Green wanted to get its snacks on the shelves of major national food chains. But it didn’t want to sacrifice profitability by doing what chains generally require: discounting products steeply and paying expensive fees in exchange for shelf space. The company lacked the cash to “pay for play” the way Kraft or General Mills might. And it feared that discounting its product would undercut its premium image and hurt relationships with its existing customers.
The Background: Since 2005, when Crispy Green introduced its freeze-dried slices of apples and pears, the company has stuck to a “transparent” pricing policy, giving wholesale customers, large or small, the same rates. Among other things, Angela Liu, the company’s chief executive and founder, feared that choosing to discount or to pay fees might represent a slippery slope that would undermine the company’s long-term prospects. A first-time entrepreneur who had left a chemical engineering career in pharmaceuticals to start Crispy Green, Ms. Liu knew she was going against the grain.
Early buyers included mom-and-pop stores and gourmet grocers like Central Market in Houston and Balducci’s in New York. By the start of 2008, having built relationships with some 200 independent groceries and small chains across the United States, Crispy Green was growing at a year-over-year clip of 80 percent. But as Ms. Liu prepared to approach buyers and distributors at bigger chains, a Crispy Green consultant, Alan Levitan, a 30-year veteran of the grocery industry, warned that her pricing policy could become an impediment.
She remained optimistic — until a meeting in late October 2008 between her sales staff and UNFI, a specialty foods distributor that works with Hannaford Supermarkets, a grocery chain with more than 150 stores in the northeastern United States. UNFI seemed to view Crispy Green favorably but said Hannaford’s corporate policy required discount terms — 10 to 15 percent lower prices than the Crispy Green would offer other wholesale customers — to fuel special sales throughout the year. UNFI wouldn’t even show Crispy Green products to Hannaford buyers unless Ms. Liu agreed to the discounts.
Ms. Liu responded that selling Crispy Green at 15 percent off one week and at the suggested retail price the rest of the season could actually drive shoppers to buy less often, encouraging them to wait for specials and thereby hurting sales volume for Crispy Green as well as for Hannaford. She concluded that offering “high-low” pricing to please a distributor was too much of a sacrifice — no matter how desirable the relationship.
As it happened, however, sales at Crispy Green’s largest retail partner to date, the Northeast division of 7-Eleven, were slowing. Ms. Liu’s buyer contact there suggested the fruit snacks were getting lost among a huge variety of items. He believed that, after a great debut, the snacks needed to be “refreshed.” Maybe special sales could do that. Ms. Liu began to wonder: Was it time for a new pricing strategy? Or was it time to abandon the hope of growing through major chains?
The Options: Ms. Liu and Mr. Levitan deliberated over the pricing strategy for weeks, but she continued to follow her instincts. “I think like a shopper,” she said. “What I don’t want in the middle of a recession is for prices to go up on a favorite snack.” Whatever she did, she didn’t want to give major chains a huge advantage over the smaller outlets whose loyalty had helped her establish the business.
They settled on two options: One was to cut operating expenses enough to create a new layer of lower, bulk wholesale prices that could be extended across the board. This would be intended to satisfy the major national groceries — but not to favor any one chain. To cut expenses, Mr. Levitan suggested scaling back plans to refresh the brand’s packaging and Web site.
The second option was to forget the big chains entirely and try to expand within existing channels. To sell a higher volume of Crispy Green where it was already known, Ms. Liu thought, she’d probably have to introduce and market new flavors and pack sizes to stimulate shopper interest. This could get expensive, she feared. Or worse, it could tax Crispy Green’s fruit supply chain.
Case Questions:
4. Are there any other issues or information Crispy Green might need to consider as it crafted a growth strategy?
To aid in your decision-making, you might want to research the company by going to http://www.crispygreen.com/ and you might want to research industry averages for this type of business. How might you start your research into the industry?
Explanation / Answer
Are there any other issues or information Crispy Green might need to consider as it crafted a growth strategy?
To aid in your decision-making, you might want to research the company by going to http://www.crispygreen.com/ and you might want to research industry averages for this type of business. How might you start your research into the industry?
Answer :
Crispy Green might need to consider where it falls on Porter's Generic Strategy
Porter's Generic Strategy is points out that companies, organisations and firms can gain a competitive edge by pursuing two broad strategies or one of the two or a combination of two strategy. The first is differentiation through cost and the second is differentiation through Product or Service Differentiation.
Competitive Advantage through Cost Leadership and Cost Focus
Internationally (in Asia Pacific and emerging markets ) Ford plans to use Cost Focus as its business strategy.
This is a competitive strategy which competes by using aggressive discounts that increase sales and helps the organisation acquire new customers. When a business launches a product or a service at a discounted rate or a low price and then increases it or removes the discount over a period of time as the product or the service market saturation increases. Traditionally e commerce companies use price or cost strategies. Marriott implements this by offering highly competitive rates in the hotel industry. They do this by reducing costs and improving efficiency so that the value can be passed down to consumers.
Competitive Advantage through Differentiation and Differentiation Focus
Domestically (in the United States, Europe and North America) Ford plans to use differentiation as its business strategy.
This is a strategy where organisations gain competitive advantage by differentiating themselves through their core offerings or products and services and the unique value that they being to their clients or customers rather than competing with prices cuts and discounts. A typical example of a non price strategy would be to follow a product differentiation strategy instead of a price differentiation strategy. Product differentiation plays a major role in strategy. By clearly communicating the value you add to a customer's life, and by being realistic and accurate in defining that core competency or core value curve of that the product brings to the customer's table. selling the product would be far more easier as it no longer needs to compete purely through its marketing strategy but it can also compete through product differentiation.The decision making process of a consumers depends on the quality, price and accessibility of a firm's products or services. Price isn't the only factor. There are other factors and areas where the firm could add more value and thats where differentiation comes into play. Disruption is also a by product of differentiation.
Crispy Green might need to consider the Problem with Customer Retention using discounts
The problem in doing so is that the ROI on discounts are decreasing with increasingly competitive discount wars between firms which is leading to dwindling profits and fickle customer base who are ready to switch or shuffle between brands like channel on a television, tuning into the next best thing after the other. They're a lot like steroids. As long as discounts are running the company's retention and sales are doing good but the second the discounts are discontinued. they see a drop in sales. This is even more tough during a recession when they need the margins and the customers.
How might you start your research into the industry?
I would kick off the research into the industry by drawing up an excel sheet or a graph / matrix of all the types of frozen snacks and snacks in the market and then look at the usp's of each and every one of them including sales. supply chain optimisation, retail partnerships, distribution networks , pricing , strategy and then i would proceed to find loop holes and market gaps that provide an opportunity for Crispy Green to capitalise on.
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