Negotiation

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9-907-003
NOVEMBER 8, 2006

JAMES SEBENIUS
ELLEN KNEBEL

Sarah Talley and Frey Farms Produce: Negotiating
with Wal-Mart (A)
Frey Farms Produce (Frey Farms), a family owned and operated supplier of fresh fruits and vegetables headquartered in Keenes, Illinois, began providing products to local and regional customers in the early 1980s, selling primarily through independent grocers in rural Illinois. The company became known for its pumpkins, watermelons, cantaloupes, and fall ornamental produce. Sarah (Frey) Talley (who would later become CEO of Frey Farms Produce) began selling pumpkins at the age of eight. 1 Brothers John, Leonard, Harley, and Ted later joined the company. In 2005, the Evansville Courier observed the success of Frey Farms had made “28-year-old Sarah Frey-Talley one of the youngest high-volume pumpkin producers in the United States.”2

Background
Frey Farms had promoted its “Homegrown Freshness” to local and regional customers early on, and continued to emphasize its commitment to providing fresh produce products as it began to serve retail and independent customers in the United States.3 The company had begun to reach “customers by way of direct store delivery routes and shipments to major distribution centers,”4 shipping products from “strategic…locations in Illinois, Indiana, Missouri, Georgia, Florida and throughout the Midwest.”5

Frey Farms’ rapid growth was further accelerated in 1997 when Sarah Talley, then 19, negotiated the supply of Frey Farms’ pumpkins, melons, and fall ornamental produce to retailers such as WalMart, which were just entering the produce business at the time. Other leading grocery stores and independents were soon being supplied by Frey Farms.

By 2005, the Evansville Courier had taken note of Frey Farms’ rapid growth and success: At the company's sprawling operation north of Poseyville, Ind., millions of cantaloupes and watermelons are picked, loaded into cardboard containers and shipped to grocery distribution centers. . . .

The Freys manage their massive operation from offices in Indiana and Illinois. Workers sit in front of computer banks, directing shipments of produce to distribution centers across the ________________________________________________________________________________________________________________ Professor James Sebenius and Research Associate Ellen Knebel prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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907-003

Sarah Talley and Frey Farms Produce: Negotiating with Wal-Mart (A)

United States. Melons picked out of the fields in Southern Indiana are loaded onto semis and are on their way in a matter of hours.6

Planting the Seed with Wal-Mart
Wal-Mart’s Entry into the Produce Market
Sarah Talley recalled that Wal-Mart was just beginning, in 1997, to expand its hometown Division One stores into “Supercenters” that, consistent with the retailer’s philosophy of servicing all customers’ needs in one store, would offer groceries and fresh produce.7 Its entry into the produce and groceries markets was a turning point for Wal-Mart, which was already servicing millions of customers annually with non-consumable retail lines.

Negotiating to Supply Pumpkins to Wal-Mart
At the time she approached a local district...
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