Reverse Marketing Case

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Topics: Flour, Wheat
The Reverse Marketing Framework: Case Malston Bakery Inc. Summary of the case: John Thomas is the Director of Purchasing of the Malston Bakery, a major bread producer. He feels really concerned by the augmentation of the costs generated mainly by important increases in flour prices, which represent 55% of the total cost of bread production. John Thomas has no results by negotiating purchasing prices with the six main flour mill suppliers, despite some repeated attempts. So he decides to conduct researches to understand how the price is built by millers and why they all offer the same kind of prices conditions. He sets several mill visits to observe the mill process and the establish contacts more successful. It appears that all millers are using a cost-price formula to estimate their selling prices. This formula is including: - Wheat purchasing cost, - The process of milling, - The cost of labor - Other costs. But the formula also cuts off: - The profits coming from the by-products delivered to the feed industry. And at the end of the calculation, all the millers are adding a 10% profit. John Thomas makes the conclusion that this margin of 10% could be a bit smaller given the high purchased volumes of Malston bakeries. But as the situation is in a dead-end street with the traditional bread wheat suppliers, John Thomas is looking for another kind of solution via a smaller mill company: Ross Mill Peter Hellibell is the new owner of a small soft wheat flour mill bought to the Ross brothers. In the dynamic of his new acquisition, Peter Hellibell has expressed his interest in expanding the current business of Ross Mill Company. John Thomas has known Ross Mill for 6 months as a potential supplier of soft wheat flour (used in the other activities of Malston bakeries like soft cakes and cookies). So John Thomas is seeing a real opportunity for developing a new bread flour source to find a way around Malston row material costs problem. On the other hand, for Peter Hellibell

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