Answered: Evaluate Golden Valley Food’s present…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

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CASE NUMBER 2: GOLDEN VALLEY FOODS, INC.

It is 2012, and Neal Middleton, newly elected president of Golden Valley Food, Inc., Faces a severe decline in profits. Golden Valley Food, Inc., is a 127-year old California –based food processor. Its multiproduct lines are widely accepted under the Golden Valley Food brand. The company and its subsidiaries prepare, package, and sell canned and frozen foods, including fruits, vegetables, pickles, and condiments. Golden Valley Foods, which operates more than 30 processing plants in the United States, is one of the larger U.S food processor-with annual sales of about $650 million.

Until 2012, Golden Valley Foods was a subsidiary of a major Midwestern food processor, and many of the present managers came from the parent company. Golden Valley Foods last president recently said:

The influence of our old percent company is still with us. As long as new products look like they will increase the company’s sales volume, they are introduced. Traditionally, there has been little, if any attention, paid to margins. We are well aware that profits will come through good products produced in large volume.

Alex May, a 25 year employee and now production management, agrees with the multiproduct-line policy. As he puts it:” Volumes come from satisfying needs. We will can or frees any vegetable on fruit we think consumers might want. “May also admits that much of the expansion in product lines was encouraged by economics. The typical plants in the industry are not fully used. By adding new products to use this excess capacity, costs are spread over greater volume. So the production department is always looking for new ways to make more effective use of its present facilities.

Golden Valley Foods as a line-forcing policy, requiring any store that wants to carry its brand name to carry most of the 65 items in the Golden Valley Foods Line. This policy, coupled with its wide expansion of product lines, has resulted in 88 percent of the firm’s sales coming from major supermarket chain stores, such as Safeway, Kroger and A&P.

Smaller stores are generally not willing to accept the Golden Valley Foods policy, may explain, “We know that only large stores can afford to stock all our products. But the large stores are the volume! We give consumers the choice of any Golden Valley Foods product they want, and the result is maximum sales” Many small retailers.

Evaluate Golden Valley Food’s present situation.
What would you advise Neal Middleton to do not improve Golden Valley Food’s profits? Explain why.

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