As Canada Goose has grown exponentially in recent years it has shifted towards a direct-to-consumer model, but is its supply chain stuck in the wholesale era?
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Interesting article underscoring why it is important for fast growing consumer businesses to focus on their supply chain once they get to sufficient scale. While management is undoubtedly focused on top-line initiatives at new businesses, it is clear they must also have one eye on the supply chain lest operational issues undo all the good work to achieve exponential revenue growth.
However, while focusing on supply chain is important; my gut reaction is that companies like Chobani should not go overboard on supply chain initiatives such as predictive analytics and flexibility. Yogurt is relatively simple and cost-effective to make and while flexibility in the supply chain is important, it is nowhere near as critical as ensuring the quality of the product – both in terms of taste and hygiene. From a manufacturing perspective, there is minimal variation in the types of products Chobani produces and thus even if demand of one particular flavor spikes, it should be fairly easy to satisfy. Even if Chobani misses out on some revenue, it is likely to be a drop in the ocean given Chobani business model is to sell a high volume of low priced goods. In contrast, another public relations fallout from customers falling ill or from a perceived decline in the quality of the yogurt could have much more significant and longer-term ramifications.
Great to read an essay that provides concrete analysis on the implications of Brexit for a particular company and the near-term decisions they must make. Although raising prices and shrinking the size of its products has drawn the ire of the British media, it is likely to be dwarfed by the resentment that would surface should Cadbury decide to close any factories, as seen by Burberry’s experience in 2009.[1]
However, apart from the sensationalized media attention, I wonder whether it is actually important to consumers whether the bars they eat are produced in the UK. Cadbury is already manufactured in more than 15 countries in the world [2] and Cadbury’s parent company, Mondelez, is headquartered in the US and has a very American heritage. If consumers are generally ambivalent as to where their chocolate is manufactured, which could easily be tested through a survey, I agree with the suggestion of investing in pilot plants in the EU. More generally, Cadbury should try to increase production in lower cost facilities outside the UK.
Secondly, Cadbury is sold in over 40 countries,[3] and thus given the broad geographic diversification, Cadbury is far from completely reliant on sales in the UK market. To the extent that any of Cadbury’s products made in the UK and exported, higher labor and raw material costs will be offset by the weaker GBP, although Cadbury will still have to absorb or pass on the impact of any tariffs. Thus, increased UK production costs may not actually have a huge net financial impact on Cadbury, in which case it is worth keeping them open to avoid the PR fallout. However, it is difficult to gauge from the outside and this decision is ultimately a trade-off management will have to make a decision on.
References:
[1] https://www.theguardian.com/business/2007/apr/18/4
[2] http://www.mondelezinternational.com/~/media/MondelezCorporate/Uploads/downloads/cadbury_Fact_Sheet.pdf
[3] http://www.mondelezinternational.com/~/media/MondelezCorporate/Uploads/downloads/cadbury_Fact_Sheet.pdf
Nikhil, great essay which hits on a topic very close to my heart – coffee! As an Australian I must confess I generally try to avoid Starbucks coffee, but I admire the company for consistently being a leader in doing business the right way by focusing on taking care of its staff, customers, and the environment. With millennials increasingly drinking from more local, independent cafes which invariably charge much higher prices than Starbucks, I have no doubt that there is significant headroom for the company to increase prices and pass on the incremental costs of sustainable practices to consumers, especially given Starbucks’s customers have a reputation for generally being environmentally conscious.
However, given Starbucks’s reputation as being somewhat of a trailblazer in such areas, I wonder if the company could do more and work with other large industry players to reduce the dependence on Arabica coffee given its impending shortage. For example, as Erica’s essay pointed out, the two largest Italian coffee suppliers – Illy and Lavazza – have partnered together along with some Italian universities to sequence the Arabica genome for the first time in order to eventually cultivate plants that are more resistant to the effects of climate change. [1]
References:
[1] http://valuereport.illy.com/pdf/BILANCIO_illy_ECONOMICO.pdf
Eleonora, great essay which throws up many interesting points! Like many other commentators I was shocked to see that the gap between manufacturing costs in the US and China has all but disappeared. As you allude to, it has been automation and productivity improvements rather than globalization that has eroded employment in the US auto industry. Despite US auto production levels at all-time highs with 17.5 million light vehicles sold in 2016 – 40% higher than 1990[1] – employment levels remain below 1990 levels[2] as manufacturers produce nearly 1.5x the number of vehicles per worker today than they did in 1990.[3] Moreover, I worry that not only are governments merely delaying the inevitable by pursuing isolationist policies to preserve auto employment, but given that the market share of the “Big 3” of US auto (Ford, GM, Chrysler) has fallen from 90% in the 1960s to below 50% today,[4] are they effectively missing the forest for the trees by allowing half the revenues from the US auto industry to flow to international companies? Would reinvesting these profits in the US or allowing them to accrue to US shareholders be of greater economic value to the US as a whole rather than inhibiting overall economic growth by pursuing isolationist policies to save a handful of jobs?
References:
[1] https://www.statista.com/statistics/199983/us-vehicle-sales-since-1951/
[2] Bureau of Labor Statistics (https://data.bls.gov)
[3] https://ark-invest.com/research/tesla-production-efficiency
[4] http://www.epi.org/publication/the-decline-and-resurgence-of-the-u-s-auto-industry/
Rasha, your essay raises very pertinent questions on who should bear the responsibility and accountability for sustainable business practices. I feel this is a conundrum not only for beef production, but for agriculture generally and indeed all business practices more broadly. Whilst I agree that Tyson should be doing more as per their mission statement and given their sheer size and influence on the industry, I believe the responsibility for promoting more sustainable eating habits ultimately lies with consumers themselves.
If consumers move towards a less meat heavy diet, insist on purchasing meat sourced from restaurants and grocery stores (i.e. Tyson’s customers), and ensure elected representatives legislate and provide appropriate incentives for sustainable practices, then companies like Tyson will be forced to implement higher standards throughout the supply chain rather than having to make difficult choices between ethical and business decisions. For example, in 2007 Tyson and ConocoPhillips formed an innovative joint venture to produce 175 million gallons of biodiesel a year (about 3% of ConocoPhillips’s annual US diesel production) from animal fats which are a byproduct of Tyson’s processes, but in 2009 Conoco suspended the collaboration after federal tax credits for the project were cut in half. If consumers ensured governments did not remove these incentives, pushed for more stringent regulatory requirements, and changed their eating and purchasing habits, Tyson wouldn’t have the dilemma of pondering such trade-offs.