Choosing a Retailer Paradise Kitchens was started by cofounders Randall F. Peter

Question

Choosing a Retailer

Paradise Kitchens was started by cofounders Randall F. Peters and Leah E. Peters to develop and market Howlin' Coyote Chili, a unique line of single-serve and microwaveable Southwestern/Mexican style frozen chili products. The Howlin' Coyote line of chili was first introduced into the Minneapolis-St. Paul market. Two years later, it expanded to Denver, and two years after that, it spread to Phoenix.

To the Company's knowledge, Howlin' Coyote is the only premium-quality authentic Mexican-style frozen chili sold in U.S. grocery stores. Its high quality has gained fast, widespread acceptance in its markets. Currently, Paradise Kitchens has introduced Howlin' Coyote frozen chilies to 15 of its planned 20 markets. In the near future, the company believes the Howlin' Coyote brand can be extended into other categories of Mexican food products, such as tacos, enchiladas, and burritos.

Paradise Kitchens believes that its high-quality, high-price strategy has proven to be successful and now is contemplating adding a new product line to its offerings, Earth Coyote Organics (ECO). Earth Coyote Organics will be positioned as a healthier Mexican-style frozen food line made with certified organic ingredients. Similar to the Howln' Coyote product line, the ECO line will feature single-serve Southwestern/Mexican frozen dinner products seasoned with lime, garlic, and red chili spices, targeted at Hispanics and non-Hispanics living primarily in the southwestern regions of the United States. The price point for the four initial ECO products will be above the Howlin' Coyote line as well as above the competitor's lines.

Paradise Kitchens has chosen selective distribution for the new Earth Coyote Organics product line and now must decide on a retail strategy.

Because of the large number of alternative forms of retailing, it is easier to understand the differences among retail institutions by recognizing that outlets can be classified in several ways. First, form of ownership distinguishes retail outlets based on whether individuals, corporate chains, or contractual systems own the outlet. Second, level of service is used to describe the degree of service provided to the customer. Three levels of service are provided by self-, limited-, and full-service retailers. Finally, the type of merchandise line describes how many different types of products a store carries and in what assortment. Product manufacturers should choose a retailer that provides product assortments and customer service levels that will satisfy its target market.

While completing this activity, please refer to Appendix A in your textbook for additional information on Paradise Kitchens and Building an Effective Marketing Plan.

Read the case below and answer the questions that follow.

Paradise Kitchens distributes its current Howlin' Coyote product through a food distributor. The distributor buys the product, warehouses it, and then resells and delivers the product to grocery retailers on a store-by-store basis. As Paradise Kitchens expands its product line to include Earth Coyote Organics, it must decide whether to utilize the same food distributor and retailer for Earth Coyote Organics it uses for Howlin' Coyote.

Howlin' Coyote products can be purchased in large grocery stores in the Southwestern and Western United States, including Safeway stores. Safeway, Inc. is the United States' third largest supermarket chain. Safeway grocery stores carry approximately 50,000 products with many choices in each product category. In the frozen dinner category alone, there are numerous brands and products to choose from, including Lean Cuisine, Weight Watchers, Stouffers, Hungry-Man, Marie Callender's, and Banquet. Many of Safeway's customers are quite price sensitive and are willing to give up additional customer services to get lower prices on the products that they want to purchase.

A second retailer serving the Southwestern and Western United States is Whole Foods Market, based in Austin, Texas. Whole Foods Market product lines focus on high-quality natural and organic products, and it consistently ranks among the top socially responsible businesses. Because Whole Foods Market will only carry products that meet its self-created standards of quality, Whole Foods can be best classified as a specialty grocery store that carries fewer products than a traditional grocery store. Whole Foods products are, on average, more expensive than mainstream grocery stores. Whole Foods' goal is to delight its customers with its well-trained, well-compensated workforce. Whole Foods believes that if it pays its employees well, the employees will deliver value to its customers.

To compare and contrast Safeway Stores and Whole Foods Markets, the owners of Paradise Kitchens have created the retail positioning matrix below. Use this matrix to guide your retailer choice between Safeway and Whole Foods Market for the new Earth Coyote Organics product line.

1. Safeway would be placed in Quadrant No. _______ in the retail positioning matrix.

A. 2

B. 3

C. 1

2. Whole Foods Market would be placed in Quadrant No. _______ in the retail positioning matrix.

A. 4

B. 3

C. 2

3. Earth Coyote Organics' primary point of differentiation is

A. its organic ingredients.

B. its relatively low price point.

C. its broad product line.

4. Whole Foods Market's customers are likely to be

A. comparison conscious.

B. health conscious.

C. price conscious.

5. Safeway's differential advantage over Whole Foods Market is

A. the large number of products available.

B. the quality of its merchandise.

C. the level of customer service provided to its customers.

Explanation / Answer

1) Safeway believes in having a wide assortment ie customers have a wide range to choose from and at the same time providing the lowest price possible even though it may affect customer service.

So the quadrant where wide and deep assortment but with low customer size is the one where Safeway operated.

So, answer is Option C : Quadrant 1

2) Whole Foods market is a specialty store and stocks fewer products, lesser variety and a narrower assortment than traditional stores. But it focusses on delighting customers by giving the best possible service.

So, whole foods lies in quadrant with smaller assortment but high customer service, which is quadrant 4.

Hence, the answer is Option A : 4

3) Earth Coyote Organic's key differentiator is its focus on ensuring Organic Ingredients even with limited assortment which may be priced higher.

So, the answer is Option A : its organic ingredients.

4) Safeway has a wide assortment and does not just focus on quality or specialty. Further, It focusses on providing the lowest possible price which may even be at the cost of customer service. So, Option B & C are ruled out.

Considering a wide range of brands and assortment that it stocks, we can say that the answer is A : the large number of products available.

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