Azalea Seafood Gumbo Shoppe

1. What is your assessment of John Addison and Mike Rathle's performance as Azalea Seafood Gumbo Shoppe's chief managers? Should they be commended for their accomplishments since buying the company? How well have they managed the process of crafting and executing strategy?

Within a period of only 12 years, Azalea Seafood Gumbo Shoppe transformed itself from a small local retail food shop to one of the largest producers of gumbo in the U.S with sales of more than one million dollars. This was largely due to the vision of Addison and Rathle of moving from retail sales to that of focusing on commercial accounts for future business. From the time they purchased the company, Addison and Rathle's immediately saw the opportunity to expand their business by marketing to area supermarkets and restaurants. Addison and Rathle adapted to their environment by recognizing the new location of their business would provide them with the ability to expand production but would not support retail sales. This provided the impetus for them to transition to the value-added seafood industry.

Addison and Rathle also responded to adversity when acquired businesses failed affecting their profitability and their customer demand dwindled due to imposed recalls. Addison and Rathle stuck to their vision and began to produce profits the year following. They also realized their core competencies (i.e. seafood gumbo) and used it as their cornerstone to anchor their guarantee of profitability. They also utilized their additional strengths of production, cost effective purchasing and streamlining of operations to increase profits and processes. They also successfully worked to market their product and establish relationships with their customers. They identified weaknesses in the area of food brokers and adjusted their operations to the use of one food broker. Gross and net profits continued on an upward trend and showed a positive balance from 1996 to 2003. They recognized their competitors and focused their operations to remain competitive. They diversified their sales and worked with customers to reduce Azalea's shipping cost.

Finally, Addison and Rathle identified deficiencies in their business (i.e. expansion vs. increased revenues) and were willing to reevaluate their strategy for the near term and long term goals.

2. What is competition like in the value added seafood industry? What competitive forces seem to have the greatest effect on industry attractiveness from the standpoint of packaged seafood producers?

The competitive environment in the value added seafood industry, while not significantly threatening, does still have its challenges. Addison and Rathle acknowledge that there is not a large competitive market for their specific area, although there are four or five that market gumbo. They acknowledgee that their largest competitors are all the other food items in the store that can be purchased. This also relates to marketing competition as Azalea used a food broker and administrative staff to monitor product delivery and store marketing exposure. Finally, there are corporations that have larger, state of the art facilities which prevent Azalea from expanding into larger demand markets. Michael Porter, a Harvard professor developed a model to assess key components of the competitive environment. First are the competitors. While currently not faced with stiff competition from peer competitors, Azalea's largest competitors may be the ones yet to arrive as Azalea is based mainly on its gumbo. It is vulnerable to a competitor that may enter the market who have a broader range of products to offer or a better tasting product. More aggressive companies with more aggressive marketing campaigns stand to threaten Azalea's exposure. Also, while not threatening the niche that Azalea has carved out, large companies with state of the art, USDA approved processes create a "glass ceiling" that Azalea can not break through without expansion or creative marketing. The next element is threat of entry. Azalea appears to have a very loyal base of customers both in the large markets and the smaller individual vendor community. However, the industry could expand at any time and with many unfilled areas of seafood product offering, Azalea could become vulnerable. In regards to the third element, Azalea once again has few competitors in the specific gumbo market and their marketing plan appears to be successful. However, customer preference is fickle and can change based on price, packaging and marketing scheme. Also, as Azalea feared before, there are many competitors (i.e. chicken, steak or fish) that customers can switch to. Lower priced substitutes can become more attractive as the economy rises and falls. The fourth element is suppliers. This is attractive for Azalea as there were many vendors to obtain the necessary ingredients for gumbo production. Also, vendors from California to the Gulf Coast are plentiful. Conversely, small value added producers, like Azalea, do not have the purchasing power to negotiate directly with the producer of the ingredients but can select from a variety of wholesalers to get the best combination of price and quality. Lastly is the element of customers. Customers are apparently loyal, but have considerable leverage to affect price as they have the option to purchase other products. Customers exercise additional leverage as they can switch product manufacturers. Also, customer base can shrink if a market (i.e. Winn-Dixie) goes bankrupt and therefore no longer become a venue to market your product.

3. How is the packaged seafood industry changing? What are the underlying drivers of change and how might those driving forces individually and collectively change competition in the industry.

The seafood industry changed beginning in the 1990s and into early 2000s with the acquisition of smaller companies by larger global food companies as they looked to fill gaps in their product offering and to expand their global reach. These large food companies then leveraged food brokers to execute additional activities on their behalf resulting in the marginalization of the small food company. The competition in the grocery market intensified as supermarkets and grocers consolidated making mega centers. This resulted in greater competition for the value added markets as now there were fewer markets. Also, this increased competition among grocers resulted in some going out of business resulting in loss of sales for those vendors. Also, these large grocery chains demands exceeded the ability for small food companies to provide products in such large volume. This forced these small businesses to focus more on smaller markets and also to identify niches in the market that could be exploited. Small restaurants and food chains now became major