RAYMOND MUSHROOM COMPANY
Raymond Mushroom Corporation (RMC) objective is to increase the number of pounds sold and the profit per pound.
In early 1980’s RMC started realizing losses. The prime factors of this loss are lack of advertisement, brand recognition; lack of knowledge about consumer behaviour; lower yield of 2.8 pound per sq. feet as compared to industry average of 3.1; the proportion of production for each style varied and were not in accordance with demand; lack of consistent presence in geographical areas.
Pricing- The current price of$1.30 per pound of mushroom as compared to industry price was not able to generate profit. The price can be increased to $1.39 as it was in 1981. This price lies between the top brands and other competitors which will make it competitive. The retailers would be paying $8.34 for case of 24 4oz. can of mushroom stem and pieces. The pricing can be varied as per the stores of Worcester to target the various income groups as is done by B in B in stores 1 & 7.
Alternatively the price increase can be avoided as per the proposition made; RMC’s variable cost is 54% of total cost of production. The total cost of production can be lowered by increasing the production thereby improving the yield per square feet from 2.8 to 3.1 which is industry standard. The yield can be improved by evaluating the competitor’s method of production and accordingly control of production process at RMC. Price increase would not be a good idea as 64 % of the consumers are price sensitive. The price increase can be made once consumer base is developed.
Brand value-The RMC should promote its mushroom as “gourmet” and high quality. The quality can be ensured by keeping low inventory. Selling them before the 50% self-life of cans is reached will ensure the quality and “gourmet” claim. For value addition the 4oz. cans should be provided with a quick recipe of...