Azalea Seafood Gumbo Shoppe

"Azalea Seafood Gumbo Shoppe"

John Addison and Mike Rathle's performance as chief managers of Azalea Seafood Gumbo Shoppe from 1991 to 2004 has been remarkable, and they have shown considerable strategic wisdom by addressing some very important questions about the future of their company and possible adjustments to their original vision and subsequent changes in their strategy.

John Addison, Mike Rathle and Bill Sibley purchased Azalea Seafood Gumbo Shoppe in 1991 and by the end of 2003 they had successfully transformed Azalea 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. After losing their lease for the original location of Azalea after less than one year of purchasing the company, and subsequently moving into a new larger location, the partners decided to follow a new direction for the business. Rathle and Addison aggressively marketed their products to supermarkets and food service accounts. The new location provided them with the ability to expand production but would not support retail sales; thus confirming the partners vision to transition to value-added seafood products. Sibley sold his interest in the business to the other two partners in early 2001.

In 2000, Azalea experienced a 15% drop in sales when Jitney Jungle, a major customer filed for Chapter 11 bankruptcy and subsequently closed down, leaving Azalea with an uncollectible $100,000 in outstanding money owed. In addition, sales figures for that year were adversely affected when a kitchen worker erroneously stamped more than $100,000 worth of gumbo with a date stamp instead of the lot number stamp, necessitating a recall of the entire shipment. Sales dropped an additional 14% in 2001.

While these events created a major setback for Azalea, the company rebounded, and revenues began to increase again in 2002 with a total of $974,911, up 8.7% from 2001; followed by another 4.4% increase in revenue for 2003. Implementing practices to lower cost of goods sold also contributed to a positive financial result for Azalea Seafood Gumbo Shoppe in 2002 and 2003. Additionally, Rathle and Addison have done a good job of managing Total Expenses, which show a decrease of 7.6% from 2002 to 2003. For that same year, Net Income increased by 27.7%. In 2002, gross profit was $418,031, an increase of 37% over the previous year; and in 2003 profits showed a further increase of 5% to $439,827.

In spite of being faced with the aforementioned product recall and their inability to recover any of the money owed them by Jitney Jingle, Addison and Rathle held to their vision of being a supplier of choice for supermarkets and restaurants. They continued their tried and true method of obtaining accounts -- personal contacts, persistence, salesmanship and keeping a favorable product placement. Azalea Seafood Gumbo Shoppe survived the losses associated with the recall and their customer's bankruptcy, and began to produce profits once again the year following.

By 2004, Azalea Seafood Gumbo Shoppe was producing more than 45 tons of gumbo and other seafood products each month, distributing gumbo, crawfish etouffee, shrimp creole and shrimp-and-crabmeat bisque to more than 1,000 supermarkets, 20 Sam's Clubs, and approximately 300 restaurants. Their excellent quality, authentic Louisiana-style products have received prestigious acclaim. Their seafood gumbo was featured in "Taste of America" and was served in the White House and their crawfish etouffee received the San Francisco Seafood Show's Silver Award for Best New Product in 1998.

Azalea operates on a just-in-time production schedule. Their short production runs allow them to maintain quality and freshness in their products. They also operate cost-effectively by eliminating as much preparation as possible. Azalea purchases diced vegetables and cooked seafood items so that they can concentrate on the production of their recipes, rather than time consuming preparation and clean-up, and expensive food waste.

Initially, Addison and Rathle were personally responsible for sales and marketing. The partners developed relationships with several large grocery accounts directly, and with Associated Grocers, a food distributor that specializes in deliveries to small grocers. They did, however, find a food broker in 2000 who was willing to work with Azalea's accounts on achieving favorable product placements; and they hired a full-time sales person in 2003, although they are both still active in the sales and marketing process.

The current competition in Azalea Seafood Gumbo Shoppe's specific product line in the value-added seafood industry is not significant, although there are four or five other producers of similar items. So far, Azalea has remained highly competitive on both flavor and price, winning out over would-be competitors in about three or four months, after consumers try the new competitor's products and find that they don't measure up to products from Azalea. Addison has stated that their real competition is with every other product in the store or on the menu. Customers can buy fish, chicken, or steak instead of Azalea's products. Azalea must also compete in the marketing arena with large companies who have aggressive sales personnel and they must compete against large corporations who have state-of-the-art facilities. Azalea's modest production facility has been viewed by at least two potential customers to be inadequate to meet their specifications, even though they liked the product.

While they are not currently faced with much competition from other producers of their seafood offerings, there is always the possibility that a company may enter the market with gumbo or other seafood items that taste as good and are as attractively priced as Azalea Seafood Gumbo Shoppe's products. With such a limited line of products, their whole operation could suffer if their products, especially their gumbo, were to lose their place in the market. Also, the large state-of-the-art producers in essence create a "glass ceiling" for Azalea in that they are shut out from obtaining those accounts unless they undertake extensive and costly expansion of their facilities and systems.

The seafood industry changed in the 1990s and early 2000s. The drivers of change within the value-added food industry have been consolidation of grocery and supermarket chains into larger, sometimes "mega" entities; greater numbers of people dining out, creating not only greater demand by existing restaurants, but actually spawning more restaurants and restaurant chains; newer food processing plants