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Copy of Ganong Brothers Limited
Transcript of Copy of Ganong Brothers Limited
Who is GBL
External : SWOT
- Located in St. Stephen, New Brunswick
- Wide variety of sugar confectionery and chocolate product lines
- 2 consecutive years of financial loss
- Challenged to develop growth plan to increase company revenues by 50%, growth must take place above and beyond changes in main business lines. Driven by business models, products or services not currently part of core business
- Major products in Canada consisted of Chocolate bars (34%), boxed and bulk chocolates (28%), hard and soft candies (18%), gum (15%), & other products (5%).
- Most produced in Ontario 67% industry employment
- Canada had four major multinational chocolate bar companies co-existing in the same market. Low profit.
- Decrease in domestic confectionery products, due to lower proportion of children in Canada and growing number of health-conscious Canadians.
- Slight increase in exports
- Canadian plants were smaller, had less capacity and served smaller markets, resulting in high unit costs
- Four generations in service remaining a private family firm
- Canadian competitive, not north American competitive
- Board of directs consisted of a strong diverse board consisting of 6 external members and 2 family members
Main goal : Boost up volume to at least 75% (industry standard)
Contracts with Private Labels
Lower competition through business relationship management
Allows us to increase volume
Allows for greater financial flexibility despite the seasonal factor
Guaranteed contracts will make it easier for the firm to obtain financing
Reducing fixed costs
We will cut our sales force (fixed cost) and sell primarily through brokers (variable cost)
Lower selling price
Since we have decent margins, we can afford to lower the selling price marginally
This will boost volume
If we are competitive in North America, then we can be competitie anywhere
By lowering our fixed costs and increasing volume we can experience economies of scale and be competitive in other markets.
Canada’s oldest confectionery company
- “Canadian competitive”
- Maintained traditional regional markets through local allegiances and seasonal
- Thailand operation doing well
and making money
Increase in exports
- Growth of retail gourmet candy
- Consumer trend towards purchasing high-quality specialtyproducts
- New St. Stephen plant has potential for expansion and
growth and the ability to reduce unit costs
- US market has potential for specialty products in large border markets
- Low competition in private label market
Small company in comparison to
the giant international firms
- Strong player in boxed chocolates in Atlantic Canada, but they have a weak presence elsewhere
- Not North American competitive
- High fixed costs due to managing its own sales force
Increase in firms consolidating
- Increase in number of foreign company’s acquiring firms in the industry
- Increase in number of health-conscious Canadians
External: General Environment
Demographic / Psychographic
Decrease in domestic confectionery products, due to lower proportion of children in Canada
Growing number of health-conscious Canadians
Free trade agreement resulting in more imports and higher competition with American firms
Industry operated at 75% of production capacity, due to specialized equipment used only for seasonal product lines
Increase in consolidation from the late 1980s of independent firms
Decrease in number of large independent firms
High foreign ownership, 60% of industry shipments were by foreign-controlled enterprises located in Canada
Brand name acquisitions being made by American parent firms
After elimination of free trade Canadian firms lost their protection from external competitors
External : Porter's Five Forces
Threat of new entrants
High threat from large global players entering the Canadian markets
Low threat from new smaller players due to the high capital required to start operation and the need for specialty production equipment
o Bargaining power of buyers
Buyers have high bargaining power
o Bargaining power of suppliers
Currently firm does not have enough volume to have a significant bargaining power with its suppliers.
o Threat of substitute products and services
Low threat of substitutes
o Intensity of the rivalry among competitors in industry
Very competitive in Canada
Large multinational firms competing for market share
Experience growth in revenues by 50% by focusing on the private label sector. This will in turn boost volume
Maintain unique business ethic and commitment to both the community and firms workers
Canada’s oldest confectionery company. It was the first in Canada to sell Valentine heart boxes
Products created by the finest ingredients using great professional care
Known for boxed chocolates
Premium boxed chocolates
Selling wide variety of sugar confectionery and chocolate product lines
Make products for private labels, only when asked
Phase 1 - Fix Internal Issues ( First 3 months)
Reducing fixed costs by cutting sales force
Cutting unsuccessful product lines
Lowering selling prices
Obtain contracts with private labels
Phase 2 - Expand into other markets (3 months to 9 months )
Expand to into overseas market and eventually the United States
How would you manage to go overseas?
Hire more management
How do you cope with demand?
Growth in demand is the best way for the company to cover fixed costs. Company is already operating at 50% capacity, so even if demand doubles, it won’t be a problem for the company. However, if the demand goes beyond that, which is unlikely, the company’s production plants are expandable. The costs for expansion will recovered after the additional production is turned over.
Success of the private label
We do not question the success of private label because we offer a product with superior quality and we already provide services in the private label but its only when asked, so we’re simply being more aggressive.
What if we don't pick up a private label contract right away?
The company can survive this period because we have a lower selling price which will increase the demand. Also, we’re lowering company’s fixed cost by eliminating salesman in the least successful areas and using brokers. Brokers are not that effective however, the benefits from decreasing fixed costs outweigh the potential sales loss.
1. It could help GBL to increase funds without losing control (partnership)
2. It could help GBL get access to sales channels, since the potential partner is an international chocolate fim.
1. This alternative may have a potential impact on the community.
2. Due to the personal issues, Mr. Ganong does not want his family business to be purchased by an outsider.
3. Ganong may have to give up more of his ownership in the future
1. This alternative could help the company to get long-term financing from the other firm without lose control of the company.
1. It may cause GBL lose its own product features.
2. Too much rely on one company is too risky
1. The company will increase the production volume in order to dilute the fixed costs
2. It could help the company build a strong relationship with the big retailers and the customers in order to get stable market share.
3. The private label trend will grow in Canada.
1. The margin may decrease, because the retail has more bargaining power to the manufacture.
Moving the factory
1. Large market in Ontario and the most of the major competitors are located there.
1. The root of GBL is the Atlantic Canada; GBL has social responsibilities to the communities.
2. Since they just build new facilities, it costs too much to move to Ontario
Consolidation of manufacturing and shared ownership
1. This alternative could help GBL lower its costs and share the risks with other companies.
1. GBL may lose some control.
2. The consolidation is so confused since every of the company produce different products with different lines.
-GBL should reach out to private labels they have produced for in the past and try to garner a long term relationship/contract.
-If GBL pursues a private label they will be able to increase the volume of their production and decrease the fixed costs per product.
-GBL has the breadth of product to provide the diversity that is required by the private labels.
-A private label is good at lowering the threat from competition.
-GBL produces a competitive product and can compete with increased
competition in the home territory through customer loyalty.
Reducing Fixed Costs, Over Differentiation and States Operations
-GBL should switch to using brokers instead of a sales team in order to reduce fixed costs.
-We already use brokers in Quebec and it will be implemented in Western Canada and Ontario. --This may cause a drop in sales but the high fixed costs are a larger problem.
-The sales team will be maintained in Atlantic Canada because it is our core market.
-GBL should cut back on some products. They are over differentiated.
-They have unprofitable lines and shouldn’t be competing in products where they are considered fringe players
-Cut Sales to the United States which is currently not turning a profit.
-We cannot afford to weather a risky venture into new territory while we are under financial duress.
-We are only reducing our volume of sales by 3% in a segment that is not profitable.
-GBL is in need of financial relief to provide flexibility so they can move forward with a business plan to provide stability and growth.
-If GBL can get a contract for a private label they should be able to leverage this relationship in order to get the financing they need.
-Ganong is a family firm and private ownership is important to them.
-This option is best for maintaining control of the company and obtaining the necessary financing to ensure solvency during seasonal trends.
Overseas Expansion and The Big Picture
-pursue the international market which is growing compared to a relatively stagnant growth in Canada/US
-concentrate on the high end market / garnering brand recognition
- Provide manufacturing of good quality products at competitive prices
- Increase private label contracts Measures
- New contracts per quarter
- Number of repeat contracts
Internal Business Perspective
- Lower fixed costs
- Operate 75% capacity Measures
- Unit cost
- Operating income
Innovation and Learning Perspective
- Creation of healthy alternative products
- Manufacturing learning
- Increase productivity Measures
- New product introduction versus competition
- Process time to maturity
- Production curve
- Overall profitability
- Increase in revenue by 50% Measures
- Revenue growth year over year
- Operating margin
- Profit per contract agreement
Given the alternatives, we feel that seeking out contracts with private labels, while lowering selling price will boost volume and will make GBL more competitive in Canada and eventually in the global landscape