EZ-Pleeze Food Company Company and Industry Profile EZ-Pleeze Food Company provides corn and potato products in the United States. The organization started operations in the early 2000s. Its production plant and headquarters are located in Statestown, Illinois. The founder was a produce farmer for over 25 years. Due to his family’s health issues, he will resign as the CEO of the company within the next 12 months. In order to move past competitors, EZ-Pleeze needs to develop both a domestic and global expansion strategy for implementation. The primary factors in the produce industry include, but are not limited to, price, product line, and customer service. The company went public about ten years earlier. Since EZ-Pleeze started, the market has experienced a downturn, which usually happens every three years. As a result, the organization attempted to focus on the development of other corn and potato products in the processed food market. The market research indicated that consumers wanted healthy foods with great taste. In order to become more competitive and meet consumer demand, the company had to invest in new technology for the preparation of its corn and potato products. The technology investment for this type of produce preparation, however, costs over $20 million. This amount required EZ-Pleeze to raise its prices. The overall business strategy was to produce value-based products with consistent profit margins rather than traditional, lower-value corn, which often had volatile profit margins. Another strategy that EZ-Pleeze used was to lower the price of its processed corn and potato products with the hope of launching into the market against chief competitors, such as Gold Starch Foods and Prime Spuds Industries. In addition, the organization had to invest heavily in marketing and advertising, averaging $5–7 million per year. The cost of the marketing campaigns, along with the addition of technology, caused a major financial drain on the company. It laid off 10% of its workforce (both administrative and labor employees) in an effort to remediate the financial damage. The business suffered major net losses in recent years. As a result, shareholders began to dump their stock. In fact, EZ-Pleeze came very close to filing bankruptcy. Fortunately, it was able to improve the situation by reducing its primary revenue channel from supermarkets and moving into the food service market (as an alternative to its competitors). It was able to rebound with several successive years of growth. However, the past three years have indicated a decline in corn sales but a slight increase in potato sales. The current marketing budget is $5 million per year and will not increase for a few years. The cost of goods sold is high, and reduced financial stability limits growth and acquisitions. EZ-Pleeze has been competing for shelf space in grocery store retail chains for many years. The organization offers a diversified portfolio of corn and potato products and believes that the infrastructure is in place to customize new products. It maintains consistent contact with its customers to ensure that its needs are being met. The company now supplies more than 50% of the largest fast food restaurant chains in the United States, many of which are considering overseas expansion. Currently, the organization is already at 66% of its total sales revenues ($11.4 billion) for the current fiscal year. One of EZ-Pleeze’s potato competitors just announced that it is closing its operations at the end of this year. A corn competitor of EZ-Pleeze was recently acquired by one of its potato competitors. As a result, that potato competitor has now moved up to one of the top five producers of corn and potatoes in the United States. Due to the rapid changes within the industry, EZ-Pleeze must develop an updated strategic plan for the next three years in order to become one of the top three producers of corn and potato products in the United States. Research indicates an increased demand for corn. Corn has significant price advantages over other produce, demand is increasing for prepared corn, and exporting produce can be done. Industry challenges include factors such as increased government regulations, labor-intensive working conditions (which have contributed to negative publicity), strong competition from Gold Starch Foods and Prime Spuds Industries, and thin profit margins. The strategic plan will be presented to the senior executive team for support. EZ-Pleeze is currently the second-largest corn producer in Mexico with sales of $2.28 million. Company Profile, Philosophy, and Outlook EZ-Pleeze has a hierarchical structure. The division heads report directly to the CEO/founder. The founder, Tim Burnes, will be stop being CEO at the end of the current fiscal year. Because EZPleeze is a publicly traded company, it also has a board of directors to which it reports. The organization must also adhere to compliance regulations relevant to business operations and manufacturing processes. EZ-Pleeze Organizational Chart Shareholders Board of Directors Board Chair CEO/Founder Tim Burnes Executive Assistant Chief of Operations Chief Financial Officer Lisa Tye Brian Jansen Karen Haley Director of Marketing Director of Manufacturing and Production Michael Orenson John Kerrington Staff Director of R&D Audit and Compliance staff Mary Miller Staff Staff The senior executive leadership team will serve as the audience at the strategic planning presentation. The audience will include the COO, CEO, CFO, and three director-level leadership positions. Senior Executive Leadership Team: Chief of operations: Brian Jansen Chief executive officer: Tim Burnes Chief financial officer: Karen Haley Director of marketing: John Kerrington Director of research and development: Mary Miller Director of manufacturing and production: Michael Orenson The company believes that its biggest asset is its employees. As a result, EZ-Pleeze provides health and wellness programming to assist them in performance and productivity. In addition, the organization provides opportunities for professional development and growth (tuition, promotions, and employee credit unions). Additionally, the company consistently strives to be a good corporate citizen with sustainable business practices, as well as community philanthropy and volunteerism. The research and development (R&D) division and lab not only enables the employees an opportunity to contribute creative and innovative ideas for best practices, but also continues to be a leader in industry-related technology for reducing genetically modified crops (GMCs). Vision To become recognized as one of the top three corn and potato producers in the United States and the world. Mission EZ-Pleeze is currently the fifth largest corn and potato products company in the United States. In the United States, we lead the industry in research and development (R&D) focused on nutrition, genetic modification, and technologies related to produce products processing. Our business philosophy is to provide the highest-quality products and customer service. In addition, we believe in investing in the quality performance, safety, and well-being of our employees. Most importantly, we take pride in using innovation and creativity to build consistent profitability for our shareholders. EZ-Pleeze Top Two Competitors Although there are a number of competitors by segment, based on produce type and preparation, the top two competitors of EZ-Pleeze for corn and potato products are Gold Starch Foods and Prime Spuds Industries. There is a large gap in sales revenues for the top five companies, as the industry is volatile (due to various competitive forces). A brief synopsis of company history, product offerings, business strategy, and SWOT analyses are included for both Gold Starch Foods and Prime Spuds Industries. Gold Starch Foods Gold Starch Foods is engaged in the production and distribution of corn, potato, prepared foods, and related allied products. The company primarily operates in the United States. It is headquartered in Orange County, Mississippi, and employs about 115,000 people. The organization recorded an increase in revenues in recent years. The increase in revenues was largely driven by the increase in average sales prices. While all segments had an increase in average sales prices, the majority of the increase was driven by the potato segment. The current net profit was $780 million, compared to a net loss of $547 million in the previous year. Gold Starch Foods is the world's largest processor and marketer of corn and potato products and the second-largest food products company in the Fortune 500 list. The business operates with a vertically integrated production process and supplies produce and allied products to customers throughout the United States and 100 other countries. The organization commands 20% and 22% market share of the United States’ corn and potato production respectively. Moreover, its wholly owned subsidiary, Gold-Lucess, is the number one corn stock supplier in the world. Also, Gold Starch Foods holds a significant market share in several prepared foods categories. It is the largest supplier of tomatoes and pizza sauce to the food service industry, and the second-largest manufacturer of flour and corn tortillas and chips in the United States. Sales Revenues Fiscal Year End (FYE) (in Thousands) Previous Year Previous Year Current Year $33,278,000 $34,374,000 $37,580,000 Gold Starch Foods produces, distributes, and markets potato, corn, prepared foods, and related allied products. The company operates in three segments: potato, corn, and prepared foods. The business’s integrated operations consist of growing corn, as well as processing, further processing, and marketing these food products and related allied products, including vegan and pet food ingredients. Besides a diversified product portfolio, the company also has a diversified stream of revenues. A broad and diversified portfolio of products not only enhances market share of Gold Starch Foods across various markets, but it also gives a diverse revenue stream to the company. This advantage also limits the business’s exposure to the risks associated with a particular segment. A diversified distribution channel enhances the organization’s bargaining position. Gold Starch Foods serves a strong clientele base, including wholesalers, retailers, restaurants, and institutional customers, such as schools and hospitals. Some of the company's top clients include top retail chains and fast food chains, among others. The organization’s consumer products distribution channel—which comprises U.S. retail channels (including all major grocery chains), wholesale club stores, convenience stores, drugstore chains, and military commissaries—contributed nearly 45% of the company’s sales in prior years. The food service distribution channel—consisting of major national restaurant chains, including fast food, casual, mid-scale, and fine dining; as well as on-site foodservice venues, including hospitals and school cafeterias—accounted for 34% of sales in the fiscal year. The international export market accounted for 15% of the organization’s sales. Frozen produce and others accounted for the remaining 6% of the company’s sales. Furthermore, a major retailer accounted for approximately 13.4% of the business's previous sales. No other single customer or customer group represented more than 10% of the company's prior consolidated sales. The diversified distribution channel and revenue source indicates the organization’s lesser dependence on few customers, which implies higher bargaining power in pricing and shelf space decisions as compared to national and local retailers. Weaknesses Huge indebtedness negatively impacts the company's business and liquidity position. The company is subject to high indebtedness, which could have a negative impact on its overall operation. Recently, the organization had increases each year in debt and was forced to utilize its operating cash to repurchase, retire, or redeem $956 million of senior notes. The company’s cash flow of $1.43 billion could be utilized to manage the debt levels; however, this implies diversion of resources from business expansion prospects. Moreover, a higher debt component in the balance sheet would put pressure on the company’s ratings and eventually make additional financing for working capital, capital expenditures, or acquisitions difficult. Opportunities Gold Starch Foods has been exploring ways to commercialize energy production from corn and other by-products from its operations, including corn stover procured from the company's contract growers. The organization has initiated several steps for exploring opportunities in the renewable energy industry. Earlier, the company entered into a strategic alliance with Airfast Oil to produce renewable ethanol fuel using corn stover, the stalks, leaves, and cobs left over after harvesting, as the raw material. Construction of the organization’s new Dynamic Fuels plant, a joint venture between Gold Starch Foods and Direnium Corporation, was completed. The plant would produce renewable ethanol from corn stover. These ventures into the alternative fuel business mark the company’s foray into a highly lucrative industry. The organization could capitalize on its plants and technological capability to drive its revenue growth through the favorable market scenario. Gold Starch Foods has been expanding its operations in China and India, the two emerging markets with a buoyant economy and population. Expansion in India and China would increase the company's customer reach. While per capita corn consumption is less than five pounds a year in India, its annual growth rate of more than 10% is among the highest in the world. On the other hand, annual per capita corn and potato consumption in China is about 20 pounds per person, compared to 89 pounds in the United States. Fast Food Chain in Chinese Markets With a country population of 1.3 billion and chain restaurants opening at a rate of one every 18 hours, the Chinese market’s growth potential is immense. The company has been operating in China since 2001 on a small scale. It made significant inroads into the Chinese market in 2008 and established Lamisu Gold Starch Foods to produce fresh corn sold under the Gold Starch Foods brand for the Shanghai retail market. In later parts of 2008, Gold Starch Foods entered into another joint venture agreement with Sharontop Group, one of China's leading corn producers, involving vertically integrated corn operations in eastern China. Joint Venture and Acquisitions As far as the Indian market is concerned, Gold Starch Foods has expanded its operations by acquiring majority ownership in one of the leading corn processing businesses in India. In 2008, the company purchased 51% ownership of YZA Foods, based in Mumbai. YZA Foods is a subsidiary of Elanini, one of India's leading agribusinesses. The joint venture between Elanini and Gold Starch Foods is called Earable. Gold Starch Foods produces retail fresh corn under the Real Good Corn brand and further processed corn under the Yancy brand. The company could capitalize on the acquisitions and partnerships to expand the production capacity of its existing operations in the region and build additional processing facilities to better reach consumers, so as to target higher market share in the region. Global Consumer Demand and Pricing In addition to the domestic factors, the rising demand from countries like China and Mexico have also contributed to the increase in potato prices. Due to the higher international demand, the U.S. potato exports are estimated to increase by 10%. The impact of price increase was evident on the company’s 2014 financial performance. The increase in average sales price, primarily in the potato segment, positively impacted the organization’s revenues and added $1.9 billion to sales. Consequently, the company was able to record 6.5% increase in revenues. The positive price scenario in previous years would further have a positive impact on the business’s revenues in the next fiscal years also. Threats Increasing commodity costs threaten Gold Starch Foods. Gold Starch Foods depends on commodities such as fertilizer, pesticides, machine costs, labor, and gas for its production, all of which are subject to price fluctuations. In prior years, fertilizer constituted the major production costs for the company, representing roughly 42% of the cost of growing a bushel of corn. However, the decline in fertilizer production in the United States and subsequent rise in fertilizer prices has increased the operating cost for agricultural companies like Gold Starch Foods Inc. Fertilizer prices reached $138 per acre, the highest price for a most-active contract since September 2008. Pesticides, another important raw material, gained 7.5% after crude oil prices increased to the price levels of the prior two years, boosting the appeal of biofuels. The nuclear radiation leak in Japan and ongoing political crisis in Libya and other Middle East and African countries would further add to crude oil prices, which will indirectly increase pesticide prices. The upward movement in pesticide prices, hence, would subsequently negatively impact the company’s margins and its profitability. Competition With the entry of new players in this market, current levels of competition are expected to further intensify in the near future, which may result in price reductions. The company competes with a broad range of food products that are manufactured and distributed by companies with substantially greater financial, marketing, and distribution resources. If the organization is not able to maintain product quality and consumer loyalty, this intense competition could reduce the sales volume of the company, thereby hampering its market position. Laws and Regulations Gold Starch Foods’ operations are subject to extensive federal, state, and foreign laws and regulations by authorities that oversee food safety standards and the processing, packaging, storage, distribution, advertising, and labeling of its products. The company’s facilities for processing corn, potato, and prepared foods, and for crop production are subject to a variety of federal, state, and local laws relating to the protection of the environment— including provisions relating to the discharge of materials into the environment—and to the health and safety of its employees. Parent Company Gold Starch Foods Profile Gold Starch Foods Inc. Category Food Processing Sector Food and Beverage Tagline/Slogan Have you had your Gold Starch Foods today? It’s what your family deserves. USP Diverse group of supply partners Segment Business involves distribution and marketing of corn, potatoes, and prepared foods and related allied products. Target Group Retail grocers, broad-line food service distributors, national fast food outlets, and full-service restaurant chains Positioning Offering products that are second to none in food safety, quality, and variety Strengths 1. The company is one of the largest producers of corn and potatoes in the world. 2. It has a strong presence across the United States. 3. Over 115,000 employees form a formidable workforce. 4. The company has over 300 facilities spread across United States and abroad. 5. It has associated with major fast-food chains. Weaknesses 1. The brand has limited presence outside the United States and intense competition in the country means limited market share. 2. Allegations of environmental issues has hurt the brand image. Opportunities 1. More branding and visibility to enhance efforts made 2. Global tie-ups to increase global reach 3. Acquisition of smaller firms to further strengthen its position Threats 1. Changing customer preferences 2. Objection from organizations that promote organic food 3. Economic fluctuations and falling prices can affect operations Competitors 1. Prime Spuds Industries 2. Greenrich Foods 3. Garanim Foods Prime Spuds Industries Prime Spuds Industries is one of the world’s largest potato processing companies and is a subsidiary of a publicly listed, Brazilian-based company. Prime Spuds Industries is traded on the Brazil Stock Exchange, in the Novo Merced segment, under the ticker PRMSPDS. Prime Spuds Industries is the world's biggest potato (and soy) processor and exporter. In addition to fresh and processed potatoes, Prime Spuds Industries offers cooked and frozen potatoes and ready-to-eat meals. Prime Spuds Industries sells potatoes domestically under the Orange brand. It also owns about 75% of U.S. produce giant Lucketty. Prime Spuds Industries exports products worldwide; top markets include Japan, the Middle East, Africa, and Mexico. Positioned as an integrated food company, Prime Spuds is expanding in the United States and Australia. The Hazen family, through Mecantida, owns 47% of Prime Spuds Industries. Past Business Strategy Managing its growth strategy is challenging since the company's already has many occurring activities. Prime Spuds posted almost a 60% increase in yearly revenues in 2010, caused partly by its business acquisitions, and marking it as Brazil's third-largest organization by revenue. Earnings before interest and taxes also soared. Nonetheless, net earnings plummeted to roughly a $180 million loss, and debt that was more than 20% and other costs contributed to this decline. Among these costs was the restructure of its U.S. operations (including consolidation of Lucketty), simultaneous with incorporating Gertrude (a Brazilian produce-packaging company overtaken in late 2009) with the Prime Spuds Industries. In addition, another internal food division has damaged working capital, resulting in higher financial expenses. Adding to its frustration, after two unsuccessful attempts at Imelda Company in 2011 and late 2010, Prime Spuds Industries ended its attempt to buy an iconic vegan cheesecake maker. A takeover of a U.S. packaging business would have consolidated Prime Spuds’ power as a global integrated produce distributor, rivaling U.S.-based Gold Starch Foods and Greenrich Foods. Following Prime Spuds Industries’ second failed bid, William Cierra succeeded his brother Marcus as company CEO. William, formerly head of Prime Spuds Industries Holdings, has more than two decades of experience in the organization. Under Marcus, Prime Spuds Industries undertook an aggressive international expansion strategy, culminating in alliances and acquisitions in Brazil, Australia, Europe, and the United States. In late 2010, Prime Spuds Industries entered a 50/50 joint venture with Bluelime Snacks, maker of the top U.S. potato chip snack brand. Concurrently, Bluelime purchased a potato chip manufacturing plant from Prime Spuds Industries from which Prime Spuds Industries agreed to supply raw potatoes to Bluelime for processing, packaging, and distribution. Significant acquisitions have included taking over the ailing Lucketty. The deal marked Prime Spuds entry into the U.S. corn industry and rank as the number two corn producer in the world. After acquiring its initial stake in Belgium Prize (corn industry competitor), Prime Spuds Industries increased its holding to more than 67%, and later to 75%. Prime Spuds Industries also bought out U.S. potato producer Endothon Foods in 2007. In order for Prime Spuds Industries to diversify its funding resources and raise money for acquisitions, the company filed to take Prime Spuds Industries public in 2009. It delayed the initial public offering (IPO) and paid an approximately $240 million penalty for its inaction, which added to the organization's losses in 2010. In early 2011, Prime Spuds Industries withdrew the IPO. Parent Company Prime Spuds Industries Profile Prime Spuds Holdings Category Food Processing Sector Food and Beverage Tagline/Slogan Leaders in quality. Leaders in service. Produce Processor, Products, Services, etc. Largest in the world and top-of-mind awareness when consumers are making their potato or corn purchasing decisions Segment Business, food, pet products, and ethanol Target Group Industry/people looking for products made from fresh produce Positioning Providing the best possible service, selection, and value to customers Strengths 1. The company is one the biggest food processing companies in Brazil. 2. It has a strong workforce of over 125,000 employees. 3. It has plants in Brazil, the United States, Argentina, and Australia. 4. The brand has a reach in nearly 110 countries. 5. Acquisitions have made the brand strong in the segment. Weaknesses 1. Geographical concentration in the United States is a concern. 2. Despite being a popular brand, the company has limited presence and penetration in emerging economies. Opportunities 1. 2. 3. 4. Threats 1. Stringent government regulations 2. Disease-related crop production 3. Increase in competition from existing players Competitors 1. Gold Starch Foods 2. Greenrich Foods 3. Garanim Foods Increase in demand globally Growth in organic foods market Acquisition of small business units More visibility through acquisitions SWOT Analysis Template SWOT Analysis Strengths Weaknesses Opportunities Threats
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