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Perdue Farms Case
Perdue Farms' tryst with the poultry industry started way back in 1940s when its business was limited to selling eggs. However, it was soon to realize that future profits lay in selling chickens which has ample scope for customization through value addition, defining unique product attributes through effective branding. Belonging to the poultry industry- an industry dependent on lot of variables which if not properly controlled can severely influence the final product quality. Being a livestock product, which depends on the vagaries of nature, its control, is still more challenging. This is because every step has its own time cycle, after which it passes on to the next cycle before emerging as a packed item after thorough processing ready to be placed in retail shelves for the ultimate end user i.e. The consumer. Perdue has been quick to visualize this and has been an early adopter of the most important competitive asset that is quality, which has been his core marketing strategy. The initial ads which were released by Frank Perdue on behalf of his company was a promise to this effect contained the slogan "If you want to eat as good as my chickens, you'll just have to eat my chickens." And also "It takes a tough man to make tender chicken."
His penchant for quality was so intense that, in an occasion, instead to arguing about quality issues of chicken that has failed to pass quality standards inspected by the Grader from the Federal Govt, he went on to the extreme of rejecting all the chickens of his farm that has already passed the quality norms of Federal Govt as well as he had a careful eye on every detail. Knowing that he has the best to offer in terms of quality, he pioneered the concept of branding chicken in a market which till then was totally commoditized. He rightly understood that in order to succeed with a product and command a premium price from his customers that is considered as a commodity, he has to communicate the market about the unique attributes of his product through effective branding and market segmentation. And that, a single pound of chicken rolling off the assembly lines of Perdue stable should be uniquely differentiated from the vast majority of his rival chicken companies which the customers would ask by name. In a fruitful endeavor towards this goal, Perdue went on build the fundamentals of a brand which are attributes, benefits, values and relationships.
Attributes and relationships are the skills of a brand and values and relationships represent its character. To break free from the commodity paradigm and brand his chicken, he took major steps like (i) vertical integration of his plant where he operated his own hatcheries, created his own feeding doses for the chickens and gave them well water and operated its own feed mill (ii) selective breeding resulting in a chicken variety which contained broad-breasted, more white breast meat & a healthy golden color compared to the conventional chicken. These two were the fundamental resource strengths of Perdue based on which it could ensure proper branding as this ensured that he had all the variables under his control which could shape a good product. Perdue's brand strength has always been 'fresh young chicken' where quality and freshness are closely linked. Therefore, the main issue might be trust: the customer reposes faith regardless of the product whether fresh or frozen is of the highest quality possible.
The second generation of Perdue Farms under Jim Perdue took off from where his father left and understood that market communication through effective ads is the most conscious method to build the fundamentals of a brand. Through effective advertisement he communicated the unique qualities of his chicken that has been raised in his own farm and how he has been carefully nurturing his chicken by giving them food which is better than what people eat mentioning about vertical integration in his ads. Besides, his chicken contained more meat per pound and was broad-breasted compared to the market. He also offered money back guarantee for any unsatisfied customer. On the export front also, Perdue's high quality became great resource strength to the quality conscious market of Japan. Besides, the preference of dark meat over white meat across Asia ensured that excess meat in American markets was sold in Asian market and that too at a premium price. Total process control made Perdue Farms a zero wastage scenario. For instance eight measurable items -- like hatchability, turnover, feed conversion, liveability, yield, birds per man hour utilization and grade were tracked on a regular basis.
Among the major resource deficiency of Perdue is shipping poultry to Asia. Due to absence of cold chains, the poultry can defrost while in transit therefore making it possible to transport the product for shorter distances only. Increased proliferation of product lines by Perdue makes designing of a distribution system which is capable of managing numerous customer orders for more than 400 different products which are processed and further made at more than 20 plants across the southeast for delivery by a single truck which is a massive distribution task.
Perdue felt the importance of quality and was an early adopter of quality during the nascent stages of poultry industry. Hence superior quality is a great strength which assists Perdue to operate in various segments and channels in a profitable manner. There is an industry opportunity represented by the present retail grocery, which is increasingly aiming at ease and speed of preparation. To cater to this need Perdue is focusing on value-added products which have drastically transformed the meat department in the modern grocery store. The industry presents five distinct marketing sale points for poultry products. (i) fresh meat counter which is the usual fresh meat that includes whole chicken and parts (ii) delicatessen processed turkey and chicken. (iii) frozen outlet containing quick freeze items like frozen whole chicken, turkeys and Cornish hens. (iii) Home meal replacement -- completely cooked entrees like Perdue Short Cuts and the brand entrees which are sold alongwith other items and desserts so that the customers on reaching home with the packets can be able to assemble their own dinners. (iv) Shelf stable represented by canned products. Perdue has a good match and has inherent strengths to compete in all the above segments and outlets as its basic ingredient -- raw chicken is par excellence.
All the above distribution channels and outlets are a good match for Perdue's strengths as it sells 'fresh young chicken' meaning that quality and freshness are closely linked. Sales on the Food Service front represented by the canteens in hospitals, schools, prisons and institutional contractors who supply them with meals although have not been brand conscious this category also will show promise in the coming years as these customers move up the value chain and demand enhanced quality. Besides, as Americans go on savoring a large percentage of their meals away from home, due to their increased mobility, conventional grocery sales have stagnated and food-service sector have displayed strong growth. In the domestic poultry industry, food service accounts for about half of the net poultry sales. In case of Perdue Farms about a fifth of its revenue is contributed by this category. But, as Perdue does not possess neither the strength nor expertise in the food service market, it tied up with a food service major Gol-Park Corporation of Monterey, Tennessee. Evidently this tie-up presents a good opportunity for Perdue which increased the company's presence in the food service market as well.
With increased customer expectations in the 21st century, maintaining high degree of quality will just not be enough. The customers of the present era demand that all the products from the house of Perdue to be of high quality. Evidently, the industry need has been to move from uncooked meat to further processed poultry. Visualizing this growing opportunity Perdue's opportunity is in opening several cooking plants. Apart from that a norm for future acquisition will revolve around the question whether they support value-added processing. Products emerging from these segments will cater to the fill food-service needs and grocery sales of prepared foods, like delicatessen, frozen, home-meal replacements and shelf stable items. Apart from that due to increased busy schedule of the 21st century customer, more time is spent outside home rather than inside. He might be witnessing a sports event, or traveling through a highway, it will be the expectations of the customer to have convenient refreshments options and a wide selection of wholesome and ready to eat products.
(i) In the poultry industry, companies are faced with two major problems. The first is time and the second is forecasting. Being a perishable item, fresh poultry has a limited shelf-life which ranges a few days only. This calls for accurate forecasting and timely delivery. However, estimating the needs on a strictly conservative basis leads to shortages of product. Customers like Wal-Mart…[continue]
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