Case Studies of Value Added Production and Marketing

in November. Taylor related that shorting their customers on orders during this important sales
season was not an option as it would create a breach in their relationships they had worked
hard to develop.
When asked about the core factors contributing to the success of the plant, Taylor ranked them
from highest to lowest importance as:
(1) Sales - All sales are confirmed before the pigs are slaughtered. With freshness
as one key marketing point, this is critical.
(2) Delivery on Sales - Many of their customers complain of being shorted on
orders by the larger processors. This is related to their overall sales volume
and order size. As a result Goridto ’ s’ customers are very sensitive to this issue.
If Goridto ’ s shorts an order, they expect they will not have the customer again.
(3) Collections - Taylor indicated that their customers are highly reliable on
accounts receivable. However, if they allow collections to occur over 14 days,
they accrue very large outstanding credit on the volume. It is critical from a
cash flow perspective not to let this get out of hand.
(4) Plant, production and processing management - Once operating, plant operations
are an ongoing concern. This is a small share of the risk of the operation,
as it simply requires getting the job done.
Goridto ’ s is now moving towards selling vacuum packaged primals rather than selling whole carcasses.
As of January 1999, they were selling approximately 50 percent of their product as vacuum
packed and 50 percent as whole carcasses. This seems to run against the earlier notion
that whole carcasses were necessary. However, the primals are still cut to the same styles as
Hispanic meat-cutters would do in store, so they are still meeting preferences. It concedes to
the economics of in store fabrication of whole carcasses and merchandising problems. The
cost of hiring meat-cutters to fabricate the whole carcass in store is greater than it costs for
Goridto ’ s to do the next step in processes (i.e., break and package the primals). Just as boxed
cuts have replaced carcasses in the mainstream market channel, it better responds to the needs
and economics of the grocery customers. At the same time, this places the merchandising burden
more directly on Goridto ’ s and at the time we visited they were beginning to stockpile
shoulders and skins. Goridto ’ s compensates somewhat by being able ship 20% greater quantity
by shipping on an in the box basis. This point best illustrates the trade-offs which can be
incorporated to take advantage of serving preferences on an economically viable basis. As
always, Goridto ’ s is attempting to provide what their customers demand.
Bo McDonald manages the two LaRanchera stores affiliated directly with Goridto ’ s (one in
Logan and one in Provo). This is a key component of their overall marketing strategy. First, it
allows them to continue to have direct interaction with their customers which they then can use
to develop or test new markets. They are investigating the addition of other stores as the
retail interface returns the highest profits and they also gain direct access to the final consumer
and are better able to provide and develop products suiting their customers’ needs. They did
not provide direct sales and cost estimates of the retail operation. However, they did provide
the estimates from the feasibility plan for a new proposed store which was based on figures
from the existing stores. Gross meat sales are expected to be generate approximately $300-
400,000 annually. The proposed store is 1,000 square feet, only slightly smaller than the existing
Provo store. They further project that they will require about 6,650 regular customers to
make their sales projections above and sell approximately 1,000 pounds of pork and 1,000
pounds of beef per week. Employment requirements are also low, requiring owner/manager
input plus 3 others. As a bottom line figure, they have developed a projection of net profit on
sales to be 32 percent. The very low cost structure is part of the overall benefit of this particular
chain. Many Hispanic customers prefer to shop neighborhood markets in contrast to the
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