lit.This caused
d to resign his
id that he and
oticed him up
:last rehearsal.
TAIIU! 1 •
PERCENT OF IALES OF SUPERITr-S MAIN PRODUCTS
36.2
21.8
14.0
8.4
19.6
""iOO:O
new plant began operations, sales spira.!ecf upward. The company rapidly
passed its competitors in sales. Mr. Baker died suddenly in 1956, leavina Mr.
Litney as the new president. Mr. Litney has continued the emphasis on quality
and sales growth.
Much o( Superite's sueceas can be attributed to the lifelong devotion of its
executives. Top management includes the (onowing people.
Praidellt: ChDria L Limlt)l FJfty-dght YeatSold, Mr. Litney has worked in dairy
operations since lJ'llduatin, from a dairy Institution 37 years aso. He has been described
by feJlcnvworkers as "aqrcsslve" and "hard driYiDg." He has a lIerce competilive
instinct. He once 1'eIJW1i:ed,''There are no rule boob in this game. Yau kick them
(competitors) while they are down, and keep kiclcing." Mr. Litney is very aclive in
community aIfain and recently held a lOppoeition in the local Chamber or Commerce.
ExecutiYe V'IU PraitkIlL' Ja_ D. Ho/HlIgfttI»1h Mr. HoIJinasworth has also spent
most or his workin, life in the dairy business. A capable person, he moves more slowly
than Mr. Litney, but Iddom makes mlstaIces. He is reprded as Mr. Litney's closest
adYiser and COIlfidant.Mr. HoI1inpworth is well liked by Superite employees and
spends much or his lime in employ. reJatinns.
,I
l'lGIJllE 1
Yiee Praidellt of Sales and Pm_loll:
Kellneth Balur
The son of the founder,
Thomas BaIa::r,Mr. BaIa::rhas been with the company since arsdualing from high
school in 1952. Mr. Ba1ceris in cItarac of all piomotiona, but since the company has
a contracl with all advertisinr &fOIJC:Y, he does little oftbe aetuaI p!anDin, hinIselr. Most
ofhis lime is spent in worldna as alialaon between Superite and the advertisin, aaency.
a.-e,
fnnel'Ql Malttlger:
HUnton
Mr. HUDtOllis olIIce rnanaaer and head or aecountin •• llnaDce. and pUrchasin, fuDctiona. He has worked for Superite for 15 years.
Before that, he superintendeDl for a larae dairy in KnoXVille,Tennessee.
Marlcethtg Mallapr:
William Starr
Mr. Starr's main job iSle maintain relatinns with
the various retsilen who handle Superite products. Wilh Kenneth Ba1cer,he aids in
sellin, up displays, invesliptes complaints, and in 'eneral Promotes aoodwWhetween
lhe company and retailers. He has worked for Superile only 2 years. Before thet, he
had a sales poeitinn with a IIlItioaal lumber IIrm.
AMis14/tt fnnllYll Ma/tllpr: Riclttml Rodnwlld - Mr. Rodewald is in charlle or production and quality COIItrol,incIucIin&storsae. maintenance, and fteet operstinns. Ho has
14 years or supervisory experieDce In dairy produeliOll and procesaina'
All of Superite's top olllcials are active in community, aft'airs. Mr. Limey
thinks that since 8uperite is a locaDy owned and operated business; "We have
an obligation to be SOOd citizens and to help Nashville grow and proaper'tO
become a better place to ,live."
The company's orpnization
is shown in Figure 1.
378
•
Analyzing environments, resources. and strategic planning
1
177
CTS
sales
npany rapidly
i6, leaving Mr.
iasison quality
devotion of its
vorked in dairy
described
ree competitive
You kick them
I very active in
r of Commerce.
I has also spent
res more slowly
Litney's closest
employees and
i been
If the founder,
ting from high
e company has
g himself. Most
:rtising agency.
id head of ac-
:e for IS years.
messee.
.relations with
leer, he aids in
xiwill between
Jefore that, he
rge of producations.
He has
"
,
, Mr. Litney
IS; "We have
d prosper to
Total fluid product sales gained 1.4percent, whereas sales of milk in all dairy
products held at about the 1967 level. Sales of low-fat milk products rose
nearly 16 percent, the third year in a row that gains were more than 10 percent.
Total skim and low-fat milk items in 1968 were about 17 percent of the total
sales of fluid milk and cream products compared to about 7 percent in 1970.
Most of the decrease came from decreased sales of low-fat (2 percent) milk.
Dairy products contribute substantially to the grossnational product of the
United States, accounting for about 16 percent or $12.9 billion of the total
value of food industry shipments in 1967. Fluid milk made up about 60 percent
of the. dairy product total.
The dairy industry _!~importantJQT~nnesse~__
as can be seen in Table 2. The
milk industry is not equally important to all states, and some-must import their
TABLE 2
•
MILK COWS. PROOUCTION. AND INCOME BY STATES. 1968 (AS OF JANUARY
1969)
Cash farm income from milk
Milk cow'"
(thousands)
State
143
2
51
102
781
99
67
15
182
139
14
156
330
252
569
212
367
180
69
170
69
473
1.057
209
380
46
210
14
39
79
38
1.039
193
156
475
155
113
728
8
72
202
329
365
75
209
231
186
67
1.887
20
13.024
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
United States
Value of cows
and heifers
Jan. 1. 1968
(1000 dollars)
25.740
665
15.950
19.620
262.880
25.300
25.550
4.480
45.360
28.120
6.900
44.460
96.195
69.870
157.300
55.125
84.000
34.650
22.040
53.360
25.125
152.195
303.690
37.280
86.520
11.520
55.590
4.125
13.760
29.930
8.385
379.220
39.035
42.000
135.810
33.200
27.600
277.100
2.760
12.920
55.640
65.120
72.930
21.320
75.400
51.865
58.000
12.600
628.200
4.700
3.801.105
Milk
production
(million pounds)
808
18
553
688
8.950
844
680
134
1.554
1.041
134
1.454
3.109
2.434
5.178
1.717
2.510
1.033
598
1.513
695
4.588
10.263
1.093
3.059
356
1.659
137
360
810
315
10.203
1.475
1.164
4.512
1.283
971
6.916
80
514
1.640
2.115
2.982
759
1.873
1.763
1.953
425
18.210
158
117.281
Average
production
(pounds)
Value
(1000 dollars)
5.650
9.830
10.840
6.750
11.460
8.530
10.150
8.930
8.540
7.490
9.930
9.320
9.420
9.660
9.100
8.100
6.840
5.740
8.670
8.900
10.070
9.700
9.710
5.230
8.050
7.740
7.900
10.020
9.240
10.250
8.290
9.820
7.640
7.460
9.500
8.280
8.590
9.500
9.880
7.140
8.120
6.430
8.170
10.120
8.960
7.630
10.500
6.340
9.650
8.110
9.006
48.910
1.807
35.086
36.542
470.286
48.153
45.208
8.063
115.123
64.544
12.619
60.352
147.91 I
127.731
215.303
83.768
116.312
64.897
37.506
91.527
47.358
244.928
425.562
59.439
139.713
15.589
65.540
7.425
22.200
48.886
20.195
557.058
86.182
38.431
144.890
66.969
51.448
407.664
5.202
33.005
64.358
106.329
183.660
38.970
110.056
96.366
106.807
21.429
807.256
6.954
5.861.517
per cow
• Average number on farms during year. excluding heifers not yet fresh.
• 8ased on data in column 5 and preliminary estimates of total cash receipts from farm marketings.
Source: United States Dairy Association.
378
•
Analyzing environments. resources. and strategic planning
Percentage of
farm income.b
'"
7.7
44.4
6.3
3.8
11.0
5.1
28.2
6.5
9.4
6.3
6.1
11.4
5.7
9.3
6.1
5.4
15.1
10.3
18.1
26.6
29.8
28.3
23.5
7.5
10.2
3.3
3.9
12.6
38.6
18.9
6.0
54.1
7.2
5.3
19.8
7.9
10.2
44.8
26.0
8.8
6.7
17.2
6.8
20.5
76.9
18.9
13.4
21.5
54.9
3.3
13.5
TABLE 3
dnalldairy
Oducts rose
l 10 percent.
:of the total
ent ~ 1970.
rcent) milk.
5auctofthe
of the total
t~percent
from milk
Perc.ntsg. of
ferm Income,·
"
7.7
44.4
6.3
3.8
11.0
6.1
28.2
6.6
9.4
6.3
6.1
11.4
6.7
9.3
6.1
6.4
16.1
10.3
18.1
26.6
29.8
28.3
23.6
7.6
10.2
3.3
3.9
12.6
38.6
18.9
6.0
64.1
7.2
6.3
19.8
7.9
10.2
44.8
26.0
8.8
8.7
17.2
6.8
20.6
76.9
18.9
13.4
21.6
64.9
3.3
13.6
DAIRY PRODUCTS IN THE
Manufactur.d
products
Frozen
d_
-_.-
Ch•••• •
."E
~
~co."
.~
E
i
Is
~
i
~
..,~
E
e•
o
•
!
J
1960
1966
1968
1969
1960"1961
1962
1963
19646
1966
1966
1967
1968,·1
i...
~
...
V•• r
I.
PER CAPITA SALES OF FLUID AND MANUFACTURED
UNITED STATES. 18&0. 18&&.•AND 19&8 TO 1988-
fluid products
~able 2. The
Import their
JARY 18881
•
...
Ot
Ot
Ot
129.3
134.9
133.0
130.7
128.4
124.7
123.7
124.4
123.3
122.8
120.9
116.8
113.6
141.7
148.7
147.3
146.4
143.7
140.7
140.2
141.4
141.6
142.1
141.8
138.4
138.8
6.2
4.6
4.4
4.3
4.3
4.1
4.0
3.9
3.7
3.6
3.4
3.1
3.0
i
E
:il
Ul
Ot
7.2
9.3
9.9
10.4
11.0
11.9
12.6
13.3
14.6
16.7
17.6
19.6
22.3
;l!
E
.!!
0
i
ie
...earing.the.Superite
trademark Princess label is sold in round cartons, which are supposed to add
to the quality image.
'/
The Nashville market
Superite's main sales effort is aimed at the retail grocery market, since this
is where management feels that the most profit is. Virtually every major food
store in Nashville handles Superite products. "There's simply no one else
around here selling Superite quality," said one retailer. Another retailer, when
asked why he thought no one was competing with Superite, said, "Everyone
knows that someone's looking out for Charles Litney. He's got this town
'sewed up.' People seem to have more than their share of problems if they try
to compete with him."
Yet, few retailers are complaining about the situation. They feel that the
prices they pay for Superite products are reasonable, and that the products
are good. Many retailers said that they would be willing to handle Sealtest
382
•
Analyzing
environments.
resources.
and strategic
planning
oducts. One
wh' product
I in ~erenJ...J
yvV'~
o percent Qf
~on
lCCOrdin....&.
to
, June, Jg1y,
~'i/
roher,
h'. Hun~
rcent by not
Jfdowntime
ae, probably
et our needs.
torage space,
It 50 percent
m chocolate,
It eight other
heminimum
:am contains
s 10 percent.
I our producing our own
t." Recently,
cartons. AI~gewhich
: in th~ wgrld
..to...1he..touch
~the Superite
.posed to add
,
/
:et, since this
y majorfood
, ne one else
retailer, when
d, "Everyone
:ot this town
ms if they try
feel that the
the products
mdle Sealtest
b
products
addition.'to Superite ptoou"ts; but. only because they wanted to
give the customers a broader range of selection, not because they were dissatisfied with Superite products. There is only one national chainfood store in the
city; the rest are locally owned.
In addition to the food stores, Su rite sells to hospitals, schools, lunch (])
coun ers, an vanous ot~jnstitutions.
Superite bi s or· e ..
aiIhe public schools, although there is little profit in this business. The purpose fi)
of ~keep
th~rit~.l!~me~JrQDt-of.th~
sales
am(,llln1:to about~r
~~
Sc!lool accounts ~eup9:~bl~ 60 to 90 '4ys .
after delivery. It would be possible for Superite to bid for the milk contract
at a nearby military installation, but since'profit margins would be slim, and·
since the inhabitants would not be long-run potential buyers of Superite products, this has not been done.
"Bid business is a ruthless one. You gain or lose a bid on fractions of a cent
per carton. At times, we wonder if this business is worth all the effort;"time,
and grief it involves," said Mr. Baker. "When it's all said and done, we
probably lose money on this business. But what with our production situation
on milk, we hang on, but we're not sure how long we should."
Another part of the milk business is the home delivery business. This is more
competitive than retail store business. Maintenance of the trucks, labor prob, lems with the drivers, and the detailed records involved are factors Superite
considers. Again the management feels that it keeps the name before the public
and of course it builds volume. About 45 percent of their milk sales are through
home delivery, but tend t~uch
Jrss profib!ble than retail store business.
Fre@.~ntly ~~.w.hose-volume
is Jaw wj1) try to take sOiiiC·-Of.
Superite's home delivery business away from them~...They usually do this by
offering discounts for an introductory period to the homemakers. Superite
drivers usually match these, and so a small milk war can develop. One device
Mr. Starr has found effective in stopping a milk war was explained by him.
"In an area where there is a war, I'll go into a large grocery store where
I'm not known. I'll fill my basket and take some of the competitor's milk .
When I get to the checkout and the clerk starts to ring up the price, I'll say,
'Hey, what's the matter with you? You're charging X cents for a quart of milk.
My sister can get that brand delivered at home for.-l..cents a quart lower [the
price the war has brought it down to].' At this point, I say, 'Well, if that's
what you charge for things here, I don't want any' and I stalk out of the store.
This usually makes quite a scene for I always pick a busy time. The retailer
then puts pressure on the competing dairy wanting to know why they are
underselling him with home delivery business. Since the retail business is more
profitable, frequently the competition' then reduces the fervor of its home
delivery expansion plans."
~'-) Superite does not have a formal policy for new roduct development. "We
) use the old time-liOiiofed me 0 oftrial and error," said Mr. Litney. "There
are four factors that determine whether or not a product will succeed: (1) there
must be a demand for that product, (2) it must be conveniently available, (3)
the product must be the best, and (4) the public must be made aware ofit
through advertising." Mr. Litney said that they depended on flavor and ingredient suppliers for new ideas, and that some suggestion§ came from employees. The company is presently considering the addition of novelty treats,
such as ice cream bars and ice cream sandwiches, to its product line. Similar
\~items sold in Nashville are now supplied by an Illinois firm.
,
383
I
•
Superite Dairies. Inc.
A local advertising agency, Miller-Brown Advertising Company, has handled Superite's advertising for many years. Once a week, usually on Wednesday, a member ofthe Miller-Brown staff meets with Mr. Baker and Mr. Starr
to plan promotional activities. Most advertising is done inside the retail stores
and includes displays and "flavor-of-the-month" sales. Each month, one flavor
of Princess ice cream is selected to be sold at special prices (usually 69 cents
per half gallon). A "theme" is selected for the flavor of the month, such as
"Hawaiian Holiday," for Superite's Royal Pineapple flavor. This theme is
carried through on colorful posters and displays in the frozen goods section
of the stores. This sale is popular with the retail store owners, who report
increased sales as a result. Their profit margin remains the same on sale
products, as Superite gives them discounts to make up for the lower selling
price.
Although the flavor-of-the-month sale is a continuous .campaign, more
intense "saturation" campaigns are conducted about twice yearly. These include extensive radio and television advertising which is designed to convey
Superite's "quality message."
One such campaign served to inform the public about the company's new
. electronic quality control system for ice cream production. Public suspense
)was first built up by repeated reference to the letters "EQC," without explain.ing what the letters represented. Radios blared the letters against an echo
background, "E ... Q ... C ...
," and newspapers and television emphasized the EQC theme. At the peak of the campaign, EQC was explained to
the public in detail. Mr. Baker said that they were not certain whether or not
this campaign was successful, since the results were difficult to measure. He
did not feel that such advertising had much value.
One of the company's recent advertising successes was a "kiddy auction,"
in which young children saved Superite bottle caps and labels in order to bid
for toys and games. Sales were noticeably increased during this campaign.
Superite has an aggressive promotion campaign for store openings. They
usually feature their Princess ice cream and Superite milk. The customer may
be offered ~ gallon of ice cream free when purchasing one at the regular
98-cent price. Or Superite can give the retailer a similar "one free with one"
offer on milk, but not both at the same opening. These store opening deals
are made to all stores likely to carry the Superite line. For some time, stores
in the vicinity of the new store have complained to Superite, asking for a special
deal at the time of the opening. They don't necessarily want the' same deal
(for it is quite costly and they had their turn), but feel special arrangements
should be made to keep them fairly competitive.
.
Customers have come to expect specials like this at store openings and stock
up to the limit of the sale (usually 2 gallons to a customer). Superite wonders
what it should offer competing stores at the time of a nearby opening. Mr.
Starr and Mr. Baker worry about this because they want to keepthe retailers
on their side, especially with Sealtest entering the marketJ
.
The case writer asked the marketing executives what their strategy was for
. the other products (after all it is 20 percent of their business) and home
delivery. Mr. Baker replied, "You have us there, I guess. These parts of the
business have not been aggressively merchandised. Most of the 'other products' are very profitable and volume has been growing but we've been so busy
with milk and ice cream we haven't given them much push. Have you got any
ideas on what we should do to merchandise them?"
r
384
•
Analyzing environments.
resources. and strategic planning
"Well," the
can discuss it, but
think much about," said
. "You sure raise qUestiOllS
cost
studies on that business.
Mr. Starr. "I guess we just haven't
on
that
end of the business, but
If we did, I suspect profit wouldn't look
we'll look into it and think about it."
Recent concern over the company's new competitor, Sealtest, is forcing
management to reevaluate its promotional policies. Sealtest is presently con- .
ducting an intensive televison and newspaper campaign to acquamt the Nasn~le residents with its produc~. Mr. Litney thinks that Superlte should step
; up its own advertising efforts to counter the possible effects of the new competi, tion. The matter was discussed at a meeting between Mr. Litney, Mr. Baker,
and Mr. Miller, of the Miller-Brown advertising agency, in which the following
conversation took place:
Mr. Litney: "It appears as though they [Sealtest] will be hitting us straight
on, up and down the product line. As far as quality is concerned, I think our
products are slightly better, but most customers probably won't be able to tell
the difference. What we need to do is emphasize the quality difference in our.
,advertising." ./I~~;:;;=j.
Mr. Miller: "That's right. What we can do is emphasize the greater freshness
of the locally processed Superite products as compared to those transported
from other areas, as Sealtest will be. this is something :that the customer can
readily understand and relate to quality."
Mr. Baker: "I think we're being slightly paranoid about the situation. Sure,
people will try the new brand at first, just to see how they will like it. But
after the newness wears off, they'll go back to buying Superite. Why? Because
we still have the best products. Oh, we might step up advertising a bit at first,
but 1 think an extended campaign would cost more than it would be worth."
Mr. Litney: "Sure, we can count on a lot of customer loyalty. Our prices
are reasonable, and 1 don't think we'll be undercut. But still, we can't ignore
competition. For every sale Sealtest makes, we'll lose a sale. It won't be our.
present competitors who are hurt-they're
not selling in the same market,"
Mr. Miller: "What 1 feel we need to do is to begin an intensive campaign
very soon that will firmly implant the Superite quality image in the minds of
our customers. This will make them more resistant to the Sealtest sales pitch."
Mr. Litney: "One thing is for certain. We haven't got where we are today
just by sitting around and letting it happen. If we're going to maintain our
position, we've got to act, and act now."
By the time the case writer had concluded his study, Sealtest had already
begun to sell in the N~..P..redictably,
Superite orders fell off moderately. Management was still uncertain what strategy they would employ to
liailclle the new competition.
,n WednesI Mr. Starr
·etail stores
,oneftavor
Iy 69 cents
th, such as
is theme is
ods section
who report
me on sale
)wer selling
,aign, more
'f. These ind to convey
rpany's new
lie suspense
out explainnst an echo
sion emphaexplained to
iether or not
measure. He
dy auction,"
order to bid
is campaign.
enings, They
ustomer may
t the regular
ee with one"
pening deals
: time, stores
~for a special
leosame deal
lfTangements
19s and stock
-rite wonders
)pening. Mr.
(the retailers
ltegy was for
s) and home
: parts of the
'other prodbeen so busy
~you got any
Profit planning and results
The Dairy Processing
Industry
reports how the average processor allocates
his funds (see Figure 2).
Separate accounting procedures are used for retail and wholesale accounts.
\ Wholesale ~ccounts are processed by a small computer, which automatically
'-'
385
•
Superite Dairies. Inc.
_Raw
material costs
SS.7¢
II"'"'-J
.It.:'.....
Salaries and wages _
21.0¢
~"~""'1Ii.
!io.;••••.J4
"NIII •••
,UIIH"I'
~
Repairs,
rent, insurance,
depreciation, and _
related expenses
1.F~.k \~ __
IE(fi· - •
~
Advertising
I.S¢
,)
7.3¢a~~._cont~~i.~tles,
Services and supplies_-"'~J~~
S.3¢
.-WirE/II\~-.
•
=/J I \'T.
Net profit_
-,
.._
Taxes and licenses
1.3¢
O.9¢
FIGURE 2 •
How the average dairy processor allocates income.
shows sales, accounts receivable, .and accounts payable. A weekly printout
breaks sales down by products and geographical sales area. This information
is then forwarded to Mr. Starr.
The retail (home delivery) system must be-processed by hand since the
accounts are too small and too frequently changed to be placed on the computer feasibly. Retail route men play an important role in the accounting
process. Each day, they bill customers (billing is done at the time of delivery)
and calculate sales per customer and total sales for the day. Records prepared
by the retail men are given to the accounting department for further processing.
Most wholesale sales are on credit, payable in 30 days; home retail accounts
are paid at the end of the month. ~tem-!D...!iI!!Y
from the heme.retail
~l~._ This is also the least profitable area of operation. Although retail operations account for 22 percent of total sales, they account for only 14 percent
of profits. Mr. Hollingsworth attributes the lower profit margin to the cost
of salesmen's commissions and the maintenance and upkeep on the company's
150 trucks. Overall, about 75 percent of costs are direct costs, with 50 percent
for raw products and 25 percent for wages. Recent financial statements for
Superite are given in Tables 5 and 6.
Annual operating budgets are prepared by Mr. Hunton, who was proud to
point out that last year's budget proved to be extremely accurate. Predicted
386
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Analyzing environments.
resources, and strategic planning
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TA.LE & •. SUPERITE, DAIRIES INC
I
DECEMBER:31,1ge7T01
·$7ro23A56
Sales' .
Cbst6f sales
Gross profit
Selling and general. expenses
Income from operations
Otherin
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