Welch Foods Inc

Welch’s is the world’s leading marketer of concord and Niagara grape based products, including grape juice and jelly. The company produces a variety of other fruit-based products, including 100 percent juices and juice cocktails in the following forms: bottled, refrigerated, single-serve, and frozen and shelf-stable concentrates. In addition, Welch’s produces a number of fruit spread products. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE=) Welch Foods Inc commonly known as Welch’s is a wholly owned subsidiary of the National Grape Cooperative Association, Inc (National Grape.

It is a cooperative owned food processing company. It processed concord grapes and Niagara grapes produced in the United States into juice, jams and other products. It was the leading marketer of concord and Niagara based products in the world. The company produced a variety of other fruit-based products, including 100 percent juices and juice cocktails. The company owned the Welch’s and BAMA brand names, using the latter in marketing of its jams, jellies and preserves in the south. Its products were available in bottled, refrigerated, single serve and frozen and self-stable formats.

Additionally, it served the industrial market supplying concentrates to further processors and other manufacturers. . (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE=) International business In the year 2003, Welch’s had found a market in 40 international markets. The principle export markets were Japan, Canada, South Korea and the Caribbean Latin America area. In 2002, the company was able to introduce seven new products in the UK through an alliance agreement that allowed it to process and distribute varieties of shelf-table products.

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It also launched a marketing campaign of approximately $8 million to support them. The campaigns entailed public relation campaigns, television advertisements, and radio promotion encompassing tactical sampling. To improve its stake in the South Eastern market, it signed an agreement on distribution with a South Korea consumer products company known as Nong Shim. It also enhanced its competitive advantage and reduced costs of new market entry in Japan by using a similar strategic alliance. Total international sales improved from $100 million in 2002 to $120 million.

(http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE) Past and present strategies being pursued. Innovation in products and packaging. From its early days, Welch’s had continuously looked to product and packaging innovation as a competitive strategy. For instance it introduced the squeezable containers for jelly and jams in 1985 to improve the feasibility of kids preparing their own sandwiches and launched the shatter proof jelly jar in 1999 to minimize accidents when kids took the initiative to “take care of themselves”.

Welch’s had also focused on innovation in convenience; such as the introduction of shelf stable juice concentrates in 1996 which allowed juices to be mixed without waiting for it to thaw. In 2003, the company introduced three new 100 percent white grape blends into the market. A principal driver in these efforts is the objective to have 25 percent of the company’s sales come from new products (products that have been introduced within the past five years). This objective was considered essential in not only extending and growing Welch’s brand but in answering the demands of consumers as their tastes and needs evolved.

(National Grape Co-operative Association, Inc. & Welch Foods Inc, 1989) Welch’s grape juice products entered the mainland Chinese market in 2005 for the first time and are now sold in 220 stores and supermarkets in Beijing and Shanghai. Many Chinese consider grape juice a health care drink with the capacity to prevent certain diseases. Welch’s purchased more than $67 million in direct and indirect materials through the free markets. Welch’s has been using free markets B2B e market place since 1999 and has saved millions of dollars on the purchase of a range of products fro labels to food ingredients to corrugated packaging.

Through free markets, it is able to maintain a reliable-secure source of goods at competitive prices, through suppliers that meet or exceed the quality, delivery and service standards that are so crucial to the company. The free markets B2B market place is a powerful purchasing tool that allows the company to evaluate multiple bids in real time. This has resulted in significant cost and time saving. This is according to Bill Coyne, director of purchasing for Welch’s. . (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE

Welch’s was one of the first food companies to take advantage of radio and television to market its products. In 1934, it began an 11 year sponsorship of the Irene Rich radio show. It became one of the television’s first corporate sponsors when it found a fit between its products and its image and the Howdy Doody show in 1951. It’s “memories” advertising campaign, which features young spokes children, entered its tenth year in 2004. Since the early days, the company focused on innovative marketing and sales approaches, magazines, radio-television, the side of trolley cars-to reach customers and consumers.

For instance, it advertised in magazines to explain to its customers. For instance, it advertised in magazines to explain to its customers why there were shortages of Welch’s products during World War II. It has also campaigned featuring kid’s favorite movies and cartoon characters such as Simba’s Pride, Winnie the Pooh, Tom and Jerry the Flintstones among others. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE Welch’s always looked for ways to extend its strong brand image.

One such opportunity was the 1999 licensing agreement with C. H Robinson, which allowed Welch’s to enter the fresh produce aisle with branded fresh grapes. The program has been very successful, generating sales of more than 16 million packages of Welch’s Fresh Grapes to consumers involving more than 30 grocery chains across the country in its first year. Welch’s launched new products, used targeted and well crafted consumer promotions and advertisements in various media including internet. This it did to increase its aggressiveness in the market.

The company recently established a loyalty program with Upromise, whereby money is contributed to child’s college education fund when a consumer (with a Upromise account) purchases Welch’ jelly products. The company has also collaborated with valupage. com to offer consumers the opportunity to select promotional products online and print associated coupons to be used in participating stores for discounts on its products. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE Research and Development. In 1997, Welch’s built a New Technology Center in Billerica.

It employed 50 quality control, engineering, research and development, professionals. It was hoped that by bringing the marketing and market research group together with the engineering, quality control and research and development groups in the same facility, ideas would flow more easily and the enhanced communication would engender more new products. It did help the generation of both products and intellectual property. They receive 14 patents in five years and patent awards on nine of these. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE

Welch’s has driven its product development objective with its own internal effort as well as through collaboration with other organizations and researchers. For example, the company has contributed to funding research exploring the health benefits of grape juice made from concord and Niagara grapes. A USDA study found that Welch’s Purple 100 percent grape juice such as grape fruit, orange, tomato and apple and more antioxidant power than 42 other tested fruits and vegetables. Other preliminary studies have suggested that the antioxidant activity of Concord grape juice may be similar to that of red wine.

Welch’s explored all opportunities it had. This was evidently when at one time it recruited celebrities such as Paul Harvey and Larry King to show consumers the health benefits of its products. It also had direct communication with professionals in the medical field to exhibit and educate them on the role of the company’s products in human health. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE Technology and Quality In 1996, the company began to look at ways to use the emerging internet to improve its business.

By 1999, Welch’s had rolled out three major new AS/400 applications, all Web-based, all using Java and IBM Websphere Application server. Welch’s has kept loyal customers over the years by providing consistently high-quality products. Concord grapes tastes just like they did in 1869 when the world was low-tech, but its AS/400 high-tech solutions that help to bring these quality grape products to the consumers’ tables in 1999. (http://www-306. ibm. com/software/ebusiness/jstart/casestudies/welches. sht) Welch’s like most other food product producers, conducts promotions like free tasting samples in grocery stores as away to attract new buyers.

Infact, the company budgets 100 million in its marketing development fund each year to support various types of in-store promotional events. Management has always seen this as a necessary investment but a nightmare to manage and measure. (http://www-306. ibm. com/software/ebusiness/jstart/casestudies/welches. sht) Welch’s ethos embodied trust, timeliness, naturalness, quality and sense of family. It has achieved this with an intense focus on protection its brand image while listening and responding to the needs of consumers.

The company’s reputation for quality has been earned through sustained dedication to uniform standards. Welch’s excellent quality control enabled the company to offer premium products consistently and continuously. The company also introduced new technologies such as its three-time pasteurization process (once after harvest, once after filtering and a final pasteurization after the bottle is filled), which according to company reports, has increased first-pass inspection from approximately 70 percent to over 90 percent. (http://www. prnwire. com/cgi-bin/stories. pl?

ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE In order to provide up-to date prices, category and promotion information, it installed a web based system of information in 1998. This ensured customer service was efficient and there was better flow of information. More over, it allowed the company to respond faster to conditions of the market. The sale representatives were also able to get timely and accurate information even though the retailers were not tied to the companies’ information system. The company also installed software to improve its merchandising performance.

It did this in partnership with a company of software development that it charged with the responsibility to manage inventories and create orders. Some retailers double the number of times they turned to the company’s products through this technology. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE) Financial performance Company financial performance can be measured in several ways. Size and change is one way. Useful size measures are sales and total assets. Profitability and change in profitability is another way.

Common profitability measures, like return on equity or investment, cannot be calculated and compared in the usual way to other food processing companies because net proceeds in Welch’s areas are not equivalent to net income. Welch’s operates on a pool basis and hence, its cost of sale does not pay a market price for their grapes but receive net proceeds which include the purchase value of their grapes. Total net sales increased by 3. 4 percent between 2001 and 2002 from # 535 million to # 553. 5 million after declining 2. 8 percent between 2000 and 2001.

The increase in 2002 was attributed to increased sales volume, increased prices and reduced trade promotion activities. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE Challenges and options. The future presents some interesting challenges for Welch’s and National Grape because of the changes in the market and industry. The company believed that because it offered growers premium prices, and a secure market for their grapes provided quality specifications were met, National Grapes share of good concord and Niagara grape growers would continue to increase.

But access to high quality grapes is only one side of the equation, the other side is for Welch’s to remain relevant by living its ethos, by strengthening the brand and responding to customer needs. (http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE The challenging presented by well-financed competitors and private label products continued to put pressure on the cooperative.

The challenge posed by store brands was that they often offered lower prices and, when bundled with the same or higher quality and packaging presentation, they successfully seized the market share away from national branded products. Grape juice was in direct competition with other fruit juices, especially apple juice. New research results showed the nutraceutical qualities of grape juice and other fruit juices such as cranberries and the companies are using these results to differentiate themselves in the face of increasing competition among processors and marketers.

For this reason, government regulations that provide inequitable distribution of advantages in the manufacturing process could adversely affect grape juice’s competitiveness. A case in point was the changes in labeling regulations imposed by the Food and Drug Administration (FDA) which required that grape juice manufacturers who declared “grape juice” or “from grape concentrate” on their retail product labels cannot dilute those products below 16-00 brix. (http://www. prnwire. com/cgi-bin/stories. pl?

ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE Conclusion and recommendations. Welch’s and National Grape have done well when most producer-owned packaged goods companies and agricultural cooperatives were facing significant performance challenges. Welch’s has been using a two-based system successfully to ensure the needs of the packaged products company and the growers. This system has enabled the company to focus and identify the components that are critical to their related and respective business.

However the market landscape was changing rapidly and Welch’s board needed to continuously explore ways to maintain and improve the company’s relevancy with consumers, its customers and its suppliers. For example, to expand its product portfolio, Welch’s may have to adopt the traditional mergers and acquisition approach that many in the industry are using to increase market share and gain economies of size. Or it may also embark on building larger strategic alliances. Either of these options may require significant capital outlay.

One way to achieve the required investment is to reduce cash patronage payments and cash equity redemptions, increasing the equity investment of patrons. The company needs to assess if the two board system, which had worked well over the last half-century for Welch’s and National Grape will support the different strategies that they need to pursue to maintain Welch’s relevance in the changing market place.

Reference:

http://www-306. ibm. com/software/ebusiness/jstart/casestudies/welches. sht. Retrieved on 19th February 2008 http://www.fundinguniverse. com/company-histories/National-Grape-Cooperative-Association-Inc-Company-History. html. Retrieved on 19th February 2008 Vincent Amanor-Boland, David Barton, Bruce Anderson, and Brian Henehan. 2003. Welch Foods Inc. Arthur Capper Cooperative Center. Case Study Series 03-03. Retrieved on 19th February 2008 from http://www. prnwire. com/cgi-bin/stories. pl? ACCT=104&STORY=/www/story/03-07-2000/0001158480&EDATE= Welch’s, Since 1869: This Is Our Story, National Grape Co-operative Association, Inc. & Welch Foods Inc, A Cooperative, 1989

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