Read the article, do (i.e., description of the problem, alternatives, key features, solution).

1. do a clearly state what problem you believe the firm is facing.

2. Next you will want to see what the options are for the firm.

3. Then you should list all the key features which you have found or developed which you feel will be helpful in coming to a decision, this is the single most important area for the case notes.

4. Finally, be sure to make a selection. As with the problem statement this would best be done in a few sentences and it should refer back to which pieces of information you found particularly compelling for making that particular choice.

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Kandy Curry

Asanka Jayakody (known to his friends and clients as AJ) has been a professional chef for over fifteen years. Currently, he has his own catering company, as well as doing personal chef work for a nice client list he has developed over the years. One of the favorite dishes in both his catering and personal chef work is his chicken curry. AJs family is originally from Sri Lanka and he has adapted and perfected his familys recipe for this signature dish.

AJ has always known he can only maintain the demanding hours of his profession for so long and has looked for a way to get out of the kitchen. For a year he worked on putting together a spice mix for his curry which would provide a great result for home cooks. The unique thing he has done is to

develop a spice mix used to marinate the meat separate from the spice mix used to create the sauce for the meat. AJ feels this is a distinguishing feature which provides great results for his curry. He also worked to alter the spice blends for three different types of meat (chicken, beef, and pork) and found a producer to mix the spices at a commercial scale and package it in a distinctive two bottle set which is held together by the label. AJ has named the mix Kandy Curry after one of the major cities in Sri Lanka. Each package of the mix will treat up to six pounds of meat.

Current Situation

AJ has been selling his product through some specialty food stores in the city where he lives. The sales to date have been a bit disappointing. On average, each specialty store only sold about one case of the mixes per month. AJ was talking with one of the store managers about what he could do to improve the sales of the product. The manager encouraged him to come in on a weekend and set up a sampling area where he could let customers try his product. Sales for just the weekend were nearly two cases, and the sales for that store increased to two cases a month, even without sampling. Now, whenever AJ can get a store to allow him to give away samples, a similar pattern occurs of very high sales for the period of sampling, with higher baseline sales after. But it can be difficult to get stores to agree as it takes up some floor space for the weekend when stores are at their busiest. And AJ is also frequently busy on the weekends with either catering jobs or personal chef work. AJ has also opened a small store on Amazon.com to sell the curry mixes. The sales, here, just like the specialty stores has been slow, only a few dozen cases a week but is building slowly. He honestly is not even sure he wants to continue with those sales as it takes up so much time to box, label, and ship individual purchases. The one nice thing about sales on Amazon has been the high profit margin. Since there are only shipping costs, much more of the retail price comes back to AJ as contribution margin.

Seeking New Markets

In an effort to stimulate sales, AJ took a bold step and purchased booth space at a Fancy Food Show in San Francisco. He bought 40 pounds of chicken, made a bunch of curry, and started passing out samples. He was hoping to attract the attention of specialty food stores from across the country, but he also got the attention of two distributors who approached him about distributing his line of curry mixes. One of these distributors is Rhinelander Foods. This company works with large supermarket chains across the country (e.g., Kroger, Albertsons, Publix) and supplies them with a wide variety of products including spices, vinegars, oils, and various ethnic food products. The executive talking with AJ said he was confident he could get Kandy Curry into at least 500 stores across the country. The second distributor was a smaller family-run firm out of Salt Lake City called Beehive Food Products. Bill Welton, the family member of the firm at the show looking for new products, told AJ he loved the curry and really wanted to distribute it as the company didnt currently have anything like it in its product line. Beehive did have a few products Albertsons purchased from them, but largely the firm worked with smaller specialty food stores. The firm had over 2,000 stores on its customer data base, and about one third of them were good customers in the sense of ordering something from Beehive at least once a month.

Rhinelander Foods

Rhinelander has been in the food product distribution industry for over forty years. While it does have literally everything from soup to nuts on its product lists, it is known mostly in the industry for its very good selection of spices, vinegars, and ethnic food products. Its customer list has over 7,500 supermarkets across the country, but mostly concentrated in the Midwest where it began. But within the ethnic food area for supermarkets in its market it is the market leader with approximately 35% of all sales of ethnic food products. The ethnic food product area has been a growing area for all supermarkets. When Rhinelander first started the idea of ethnic food usually meant soy sauce, crisp chow mein noodles, bottled salsa, and refried beans. When you look at the ethnic food area in a supermarket now you may see two dozen hot sauces from different areas of the world, mixes for meals from China, Vietnam, Thailand, India, and Japan, dried black mushrooms, along with the five different soy sauces including organic, low sodium, and gluten-free. Jerry Peterson, the Rhinelander executive AJ had met, told AJ that the firm has five sales reps that call on each account at least once a month. The reps were paid partially by salary, and partially by a 3% sales commission that was figured into the margin that Rhinelander charges to distribute the product. The sales reps both checked to make sure that products were well-displayed and properly priced and to introduce new products which they felt would sell well. Jerry said that one of the things that AJ should be prepared for is that there would be a slotting allowance of approximately $50 per facing of the curry mixes. He said this price was so low because the product would not take up much space. He couldnt estimate sales, but said he was confident each store would sell at least a case a month. In fact, he said if the store didnt sell that much, they would probably lose the facing to another product.

Beehive Food Products

Bill Welton told AJ that he was very excited about the possibility of distributing Kandy Curry to the specialty food stores that his firm worked with. His family had been building this business for the last twenty years and felt very confident about its ability to effectively distribute AJs products. Currently Beehive had a number of successful product categories such as healthy snack items, specialty salts, organic breakfast cereals, and some artisanal cheeses had just been added to the product mix. Bill said that in addition to a paper catalog and an on-line catalog, the firm had three salespeople in different areas of the country whose sole job was to service the current customers and keep trying to find new customers for the firms products. These sales reps tried to visit with each of their accounts once a month, but because each had a fairly large territory to cover, it wasnt always possible. But the firm did make sure that every customer was contacted at least by phone every two weeks. The sales staff, like Rhinelanders, was paid through salary plus commission on sales, but their commission was 4% of wholesale price to the retailer compared to Rhinelanders 3%. And just like Rhinelander, that cost was already included as part of the overall margin the firm wanted for distributing the product. AJ asked Bill about the idea of slotting allowances, once he found out that this was something that he would have to pay for getting his products into stores through Rhinelander. Bill told him this type of arrangement was only used by large supermarket chains and his firm refused to ever pay one. The smaller specialty stores were much more interested in products that they could move off their shelves and into the consumers homes as they didnt have the space or volume to store a lot of slow- moving merchandise.

Will It Sell?

When AJ got home he filled the few orders he had gotten at the show and realized the profit from those sales barely covered the cost of the samples and his room. So he started getting serious about how he was going to expand his sales. AJ knew from his own efforts, and research he had read, that a large percentage of people who sample a product, especially a food product, end up buying the product. So he went back to Rhinelander and Beehive to ask about sampling programs. Rhinelander said that it could arrange for it, but the cost would have to be paid for by AJ and it would be about $125 per store, per time. Beehive said that generally it could convince one of their customers to make and distribute samples if the company provided extra free merchandise. For Kandy Curry, it felt that a store would be willing to make and distribute samples if Kandy Curry provided a free case of mix, which is twelve packages.

Will It Be Profitable?

No matter which distributor he went with, the suggested retail price per package would stay at $11.95, the same price as what he was currently selling it for on Amazon. The $11.95 price gave him a nice margin of 70% when selling through Amazon and customers paid shipping costs of $3.95 a package, or he shipped for free if the customer bought three. Rhinelander said its retailers would want a 35% margin on the retail price, and Rhinelander normally took a 20% margin of that wholesale price. Beehive said its retailers wanted a 40% margin, and that it also took a 20% margin to agree to wholesale the product. AJ felt he now had enough information and it was time to sit down and make a decision about how to proceed. The one thing both distributors had promised is that AJ was welcome to continue selling his product on Amazon and doing the self-distribution with his current set of specialty store customers. Now it was time to do some hard-number crunching, as well as some soul searching. AJ had to think about not only how many cases he might be able to sell through each distributor, but also the fit between the distributor and his product. Making a distribution decision is something that should be done with a long term focus, not a quick tactical decision like deciding which of his local specialty stores to do sampling in this weekend. He knew he had to get help in distributing his product if he ever wanted to get out of the kitchen, but which direction to go doesnt look like an easy decision.