WHEATSHEAF FOODS, INC.
Wheatsheaf Foods is in the business of producing a variety of food products – mainly soups, cereals, and sauces/condiments – sold by supermarket chains under the supermarket’s “house brand” name, and products for national brands, under license.
The company was founded in 1994 by current CEO Carol Torelli, former senior executive at a major national foods company, and four colleagues from the same firm. Headquarters is in Richmond, Indiana, with manufacturing plants in Richmond, Kansas City, Missouri, and Portland Oregon.
Wheatsheaf has built its success on an efficient and high quality manufacturing operation, which enables it to keep costs to customers under control in what is an extremely cost-competitive business sector. In addition, its supply chain management processes have enabled the company to build good relationships with suppliers, while holding them to strict cost, quality, and delivery requirements. Research and development expenses are low, since product development is largely handled by customers. What R&D there is at WF is focused on improving operations, logistics, and packaging.
Presently, the “house brand” part of the business accounts for 75% of WF’s revenue, but only 30% of its operating profit, while the “license” business accounts for the balance of both. Profit margins are very thin, and neither sector is growing. While currently both agricultural and energy prices are low, WF has not been able to increase its profits, due to growing competition.
Torelli has outlined a new strategy, in which WF will retain the license business, but exit the “house brand” sector within the next two years. Growth for WF will come from a line of food products under its own name, targeting current supermarket customers, plus smaller stores and specialist food retailers. PT envisions offering a range of high quality products, including fully organic foods. Margins and growth rates are far higher in these sectors.
In short, she wants to transform the competitive position of the company from that of cost, efficiency, and quality, to that of brand and customer responsiveness.
1) Whatever the merits of her business plan, what effects are these changes likely to have on the characteristics of Wheatsheaf Foods Inc.?