Caselet

Caselet

1)Good food Box Case ( just answer the question on page 5)
2)Caselets Assignment ( you might need to see it just)
3) Guid to answer the question on Good Food Box Case.

Business Case – Published October 2014

The Good Food Box

Dr. Leo Wong and Gordon Lucyk wrote this case for the intended purpose of class discussion, with no intention to comment on actual managerial decisions. Names and

other identifying information may have been disguised to protect the sensitive nature of some of the issues discussed.

The reproduction, storage or transmission without its written permission from the authors is prohibited. To order copies or request permission to reproduce materials,

contact Dr. Leo Wong, MacEwan University City Centre Campus, Edmonton, Alberta, Canada, T5J 4S2; phone

Abstract

Set in May 2011, this case focuses on a decision that Jessie Radies, founder of Live Local Alberta and the Good Food Box in Edmonton, Canada has to make regarding the

Good Food Box´s strategy for its target market. Included in the strategy formulation were issues related to determining what marketing elements were working to their

advantage, working against them and areas to examine in more detail.

Background

After 1.5 years of operation, the Good Food Box was at a crossroads in terms of its marketing strategy. Selling local food online for home delivery was proving a more

difficult challenge in terms of attracting paying customers. Although the idea was well received and socially popular, translating that interest into sales was another

matter. If additional revenue was not secured soon, the program was in jeopardy of closing down. The founder of the organization, Jessie Radies, had to decide in which

direction to take the Good Food Box to ensure its immediate survival and ultimately, its success as a retailer of local food.

Originally financed by the Social Enterprise Fund, in Edmonton, Alberta, the Good Food Box (as a program of Live Local Alberta) was able to get off the ground with a

large warehouse facility, delivery trucks and hired staff to run the operation. It managed to overcome some of the early growing pains every start-up faces, let alone

a social enterprise start-up, such as gaining traction in the marketplace through differentiation. Social enterprises are enterprises that typically apply business

principles in their operations to achieve social or philanthropic goals. A major premise of Live Local Alberta was to promote awareness and provide options for

consumers to support the local economy.

The Good Food Box appealed immediately to the same consumer segment that frequents farmers’ markets on a weekly basis and was price insensitive to the products that

are considered ‘sustainable’, ‘local’ and/or ‘organic’. However, Jessie thought that this core group was not large enough in a city like Edmonton to sustain a social

enterprise whose mission was to address local food security issues. Thankfully, she reflected that it is cold enough in Edmonton during the winter months that home

grocery delivery can also be seen as an appealing service. Jessie worried that the two consumer segments drawn to each aspect of the Good Food Box (the localness of

the food and the home delivery service) may not overlap that much, and therefore they would not value the service enough to pay the price needed to be profitable.

The major question Jessie was concerned about was how could the Good Food Box make the necessary changes to its marketing strategy to gain market share or share of

wallets before its funds dry up?

Location and Economy

Business Case – Published October 2014

The population and economy had been growing along with Edmonton’s role as a supply and infrastructure base for the development of new projects in the Athabasca Oil

Sands. The Edmonton Census Metropolitan Area (CMA) grew by 12% from 1,034,945 in 2006 to 1,159,869 in 20111, second only to Calgary. In addition, the economy had

recovered from a decrease in GDP of 4% following the 2008 world recession to growth of 3.2% in 20102. Employment in the CMA during the second quarter of 2011 was

662,900, an increase of 26,400 from the same

quarter of 2010. Unemployment was at 5.4% which was a decrease of 1.4% from the previous year3.

Demographic data from the 2001 Census of Canada (the latest available as of the 2nd quarter of 2011) showed the average household income was $57,360, with 37% of

households having an income greater than $60,000. Over 50% of the population had either some College or University education, with 19% having a bachelor’s degree or

higher. The breakdown of labour force by occupation group had 26% of the workforce employed with sales and service occupations, 18% in business, finance and

administration, and 16% in trades, transport and equipment operations. Appendix 1 provides selected 2001 Census tables from the City of Edmonton Planning and

Development department4.

In addition, Statistics Canada provided a more recent breakdown of Edmonton household expenditures by category. Of the $57,489 average expenditure of households in

2009, $7,398 was spent on food, representing 12.9% of household expenditures. Food was the 3rd largest expenditure category after shelter and transportation (Appendix

2).

Competition

Competition for the Good Food Box was provided by various direct and indirect competitors. A relatively close alternative was from local farmers’ markets, which

typically operated on weekends throughout the year.

Most directly comparable, the Organic Box was a family owned and operated delivery service that started operation in May 20105. Whereas the Good Food Box allowed

customers to add products to their Coleman coolers from a list of over 800 products from 70 Alberta food producers and growers, the Organic Box sold one of three

standard box offerings at a price from $35-50 based upon the size of the box. Free delivery was available for orders over $50. Local organic products were used when

they were in season, while non-local organic food was sourced when local producers are out of season.

The largest of the direct competitors included the Strathcona Farmers’ Market, which listed over 130 vendors, of which 33 were suppliers of agricultural products, 35

food vendors, and 29 craft suppliers. Farmers’ markets carried products from local suppliers including organic vegetables,

1 “Edmonton Indicators 2006-2011 Census Population,” http://www.edmonton.ca/business_economy/documents/PDF/Census_2011.pdf (February 2011). 2 “The City of Edmonton

Economic Outlook,” http://www.edmonton.ca/business_economy/economic_data/long-term-economic-outlook.aspx (June 2011).

3    Erick Ambtman and Kalen Anderson, “Edmonton City Trends Second Quarter 2011,” http://www.edmonton.ca/business_economy/documents/Second_quarter_2011.pdf (2011).
4    “2001 Edmonton Demographic Profile,”

http://www.edmonton.ca/business_economy/documents/InfraPlan/Citywide.pdf (2001). 5 “The Organic Box”, http://www.theorganicbox.ca/ (accessed February 2012).

Business Case – Published October 2014

meat and products as well as products, which were not certified organic. Some suppliers at these farmers’ markets also supplied the Good Food Box. Prices at the

farmers markets were typically slightly higher than produce prices at local grocery stores, particularly those items that were produced organically.

Edmonton also had a number of major grocery chains, which were substitutes for the products supplied by the Good Food Box. These included large Canadian chains such as

Safeway, Sobey’s and Save On Foods as well as big box and wholesale offerings including Costco, the Real Canadian Wholesale Club and Walmart Supercentres (Appendix 3).

Other local independent grocery stores such as the Italian Centre Shops featured local products as well as imported foods, meats and cheeses from Italy as well as

different parts of Europe. Various Chinese and Indian grocers met the demands for these products within the community. Planet Organic, headquartered in Edmonton with

stores throughout Canada had two stores offering organic products.

Buying Local

There were a number of trends and movements that contributed to the promise behind the Good Food Box. Consumer trends toward organic products and consumer resistance

to some genetically modified organisms (GMO’s) in various regions of the world have led certain market segments to value local produce.

There has been growth in the Buy Local movement in North America. The prime concept behind the Buy Local movement is that buying local supports local businesses.

Advocates of Buy Local discuss how buying local provides local producers with purchasing dollars, and more money remains within the community in comparison to buying

from larger national or multinational suppliers. In an article on Buy Local in June 2009, Time Magazine6 indicated that research showed that twice the money stayed in

the community when shoppers buy produce at a farmer’s market then at a supermarket according to The New Economics Foundation, an independent economic think tank based

in London, England.

A second aspect of the Buy Local movement included concerns about sustainability and the carbon footprint of sourcing products from around the world. Climate Change

and environmental sustainability issues had been increasing in importance throughout various regions in the world, with many consumer groups and Non-Government

Organizations (NGO’s) advocating for the reduction of fossil fuels. Transporting goods around the world becomes less viable as fossil fuel prices rose, such as the

increase in the price of oil to USD$147 per barrel in 2008. Edmonton’s Live Local stated on its website that the typical North American meal travels 2400 kilometres to

reach the consumer. More significantly, 73 cents out of every dollar spent globally on food goes to transportation.

The Operations

Being an online retailer of local food is not easy. The Good Food Box, when they first launched, was slow to attract a wide variety of producers but has since been

able to offer a large assortment of food including seasonal fruits and vegetables, assorted meats, dairy products, bread, desserts, non-perishables such as sauces and

jams, and even some pet food!

6 Judith D. Schwartz, “Buying Local: How It Boosts the Economy,” http://www.time.com/time/business/article/0,8599,1903632,00.html (June 2009).

Business Case – Published October 2014

They had a functional website where customers can make orders by reading a short description of a food item that includes who the producer is and view a photo of that

food item. Customers must first create an account or login if they already have an account. After they have selected the food they want to order, they can check out

and pay online with a credit card. All orders to be delivered must be submitted by Saturday before midnight for delivery the following week. Customers had the option

to pick-up their food orders instead, if they wish.

Delivery was by truck, which the Good Food Box owns. They had one truck, operated by one of two drivers they had on staff. Deliveries were made once a week, and the

day a household received their food order depended on their postal code. Groupings of postal codes (determined by proximity to each other) were designated to different

days of the week (either Wednesday, Thursday or Friday). Households in one area could receive their food on a Wednesday, whereas another household in a different part

of the city could receive their food on a Friday, for example. The food arrived in a Coleman cooler, to ensure freshness and that food remained cold. The coolers had

been known to withstand the cold Edmonton winters, and preserved food quite well during the hot summers. The coolers were placed by the front door of the homeowner

when delivered. At this point, only households in the pre-selected postal codes could receive deliveries, as the management of the Good Food Box believed the majority

of its potential customer base was included in these areas. Customers who wish to pick-up their food order and save on delivery fees, could do so by driving to a

warehouse facility in the city’s northeast end, where the Good Food Box had all of its operations. Unfortunately, this warehouse was not situated where the majority of

its customers were located.

In addition to their two delivery truck drivers, they also had a project manager and someone to take care of the warehouse operations. As a team of four, they ensured

that all orders were filled (done primarily on Monday and Tuesday), that new products were received and sorted appropriately, and that financial and administrative

responsibilities were taken care of. The founder, Jessie Radies, was not directly involved in the operations and mostly focused on oversight of the operations and

maintaining producer relationships, although she did fill in at times when needed in the warehouse.

The pricing strategy they used was simple as they applied a standard mark-up on all the producer’s wholesale pricing. There were no other pricing methods used such as

odd-even pricing or target pricing. The only price incentive they offered was periodically putting some items on sale to help move stock. As a home delivery service,

they charged for delivery and were able to make a small profit on that revenue as well.

Their sales averaged about $10,000 per week, which covered about half of its operating budget. The rest of the funds came from a combination of public grants and

loans. Their sales followed a seasonal pattern, mostly affected by the availability of local food elsewhere. In the spring and summer, sales dropped off. Management

believed that the availability of homegrown backyard produce and the popularity of farmers’ markets during those months were the main reason for the slowdown in sales.

In the fall and winter, sales tended to pick back up.

Customers

Understanding their customers and their preferences was considered a top priority for Jessie and the rest of the management team. They developed this profile of their

customer segments, in hopes of appealing to some of them:

Business Case – Published October 2014

1.    Conscious Eaters: those who are conscious of both their own health and their environmental impact.

2.    Modern Women: females over the age of 37 and with a household income of over $120,000.

3.    Mobility Impaired: non-drivers or those that have mobility issues including post-secondary students, those over the age of 65 or those who are infirm.

4.    Busy Bodies: adults who are very busy at work where going to the grocery store or to the farmers’ market is difficult, and appreciate the convenience of the

food delivery to their door.

Moving Forward

With their customer base at half of what they needed to break-even and no clear direction on how to grow their business further, Jessie had to assess which elements of

the Good Food Box to strengthen, which to scale back on, which areas needed more market research, and ultimately, in what direction to take the Good Food Box.

Questions to Consider

1.    What were the opportunities in the market/industry that the Good Food Box could take advantage of?

2.    What were the strengths of the Good Food Box, in terms of internal activities that were under their control?

3.    What were the threats in the market/industry that the Good Food Box needed to be aware of and develop a plan to address?

4.    What were the weaknesses of the Good Food Box, in terms of internal activities that they needed to fix?

5.    From your answers to questions 1-4, which are the most important issues to focus on and why?

6.    What are some of the alternative directions Jessie can consider?

7.    Should Jessie look at a major shift in strategy or minor changes to improve their sales outlook?

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