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Managing the Food System

by: Dr. Mabel Hegmann

Managing the Food System AG BM 460

Dr. Mabel Hegmann
Penn State
GPA 3.52

James William Dunn

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James William Dunn
Class Notes
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Popular in Agricultural Economics And Business

This 0 page Class Notes was uploaded by Dr. Mabel Hegmann on Sunday November 1, 2015. The Class Notes belongs to AG BM 460 at Pennsylvania State University taught by James William Dunn in Fall. Since its upload, it has received 16 views. For similar materials see /class/233043/ag-bm-460-pennsylvania-state-university in Agricultural Economics And Business at Pennsylvania State University.

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Date Created: 11/01/15
Fenn s Finest Chocolate Sugar ames W Fenn s Finest Chocolate is a mediumsized familyowned candy manufacturer The candy industry has three major rms Hershey Mars and Nestles and many smaller rms Competition is fierce with a lot of advertising and the retailers put a lot of pressure on smaller firms who want to get their products on the store shelves These include slotting fees mandatory special promotions and discounts on the product As a result controlling costs is essential However the major companies also do a lot of advertising often at costs that are well beyond the capability of the smaller firms like Fenn s The president and principal owner is Doug Fenn Mr Fenn is a handson boss but he delegates considerable authority to his employees He will consider new ideas and support employees if they make mistakes but he expects them to be able to clearly explain their thinking as such ideas are set forth in the weekly executive committee meetings As the fourth generation in the firm longrun profitability is his goal The rm has three vice presidents who have differing perspectives on what the rm should do to make the business do better Mike Mahoney is the vice president for marketing He faces the buyers every day and is very conscious of costs because he is getting pressure daily from his customers to make price concessions Jane Jenks is the vice president for research and quality control With her PhD in Food Science from Penn State she works on developing new products and working with the formulas for existing products She takes great pride in the high quality of the Fenn s candy line especially the Big Boogie bar which she developed in her first year with the rm The third person is the vice president for operations Stan Sabers He is responsible for the processing lines and must see that the product is made according to specifications is uniform and that productivity and cost targets are met You are the raw product manager Your job is to buy the commodities from which the candy is made The four main ingredients are cocoa sugar milk and peanut butter All are available from a variety of sources in various qualities for various prices In the appendix are some price history graphs and a brief discussion of the commodity You report to the executive committee and discuss your short and longrun procurement strategy Mr Fenn and the three vice presidents often have lots of questions One of your employees Jorge lbarra is originally from Tabasco Mexico His family owns a sugar cane plantation there that has been prosperous but now needs several hundred thousand dollars in capital investments Mr Ibarra has approached you about having Fenn s either lend the plantation money or invest in the operation In return the Ibarrras will sell their entire output to you at prevailing world prices FOB Tabasco Under the North American Free Trade Agreement NAFTA Mexican sugar has complete access to US markets tariff free However the Mexican industry is small and until now you have been unable to find a reliable source of Mexican sugar The Ibarras expect to produce about 70 of Fenn s sugar needs per year 1 Outline the process you will use to evaluate the opportunity 2 What information will you need 3 What factors do you expect to be especially important in what you decide to do Sugar Sugar is the most protected crop in US agriculture The protection dates from early colonial days and now the world sugar price shown in the accompanying chart moves extensively while the US sugar price sits at support about 21 cents per pound except in those few instances s that can use a liquid product and so when world prices spike above it lligh huctose com syrup has mbs tu ed for most domestic se the m ar 39 yrogarn had no budget impact since prices were maintained by resu icnng im rts llowever domestic consumption has hllen so much and wade ageements web as the GATT dN A require the U s to allow minimum access to our market for fordgn sugar Now this access is unde ining the support price and requirin govemment purchases to maintain the 39ce The sugar yrogarn only allows a very small amount of nigarimports a ut l o nsumption These imports however are purchased at world prices which are umally about u to 11 the domestic price All U 3 buyers would pur hase on the world market inhey could hut import quotas prevent it NAFTA allows unlimited access ofMtxican gown sugar Mexico doesn39t gow much sugar now hut could if the yrogarn continues wow RAW SUGAR mes uswm w pwnu s a type august A mars g balmu a mum m lMMwmgtiw Avrmmvmrmru


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